Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message|
( followers)  

Cash-flow analysis is one of the most important aspects of evaluating companies – although earnings can sometimes deviate from economic reality, it is very difficult to manipulate cash holdings. Cash is also what keeps a company afloat.

We ran a cash-flow growth screen on low-debt stocks (with most recent quarter total debt to assets below 0.2) that are undervalued according to the Graham number. The Graham calculates the maximum fair value for a stock, such that any stock trading at a significant discount to the number appears undervalued.

The Graham Number only requires two data points: current earnings per share and current book value per share. The Graham Number = Square Root of (22.5) x (TTM Earnings per Share) x (MRQ Book Value per Share). This equation assumes that a stock is overvalued if P/E is over 15 or P/BV is over 1.5.

We screened these undervalued, low-debt stocks for those seeing high growth in operating cash flow/common equity, comparing the trailing-twelve-month number to the five-year average.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Do you think these stocks are undervalued? Use this list as a starting-off point for your own analysis.

List sorted by potential upside implied by the Graham number:

  1. Superior Industries International, Inc. (NYSE:SUP): Auto Parts Industry. Market cap of $527.26M. TTM operating cash flow/common equity at 0.16 vs. 5-year average at 0.09. MRQ total debt to assets at 0.00. TTM diluted EPS at $1.89, MRQ book value per share at $15.66, Graham number at $25.81 (vs. current price at $19.01, implies a potential upside of 35.75%). The stock has performed poorly over the last month, losing 11.38%.
  2. Provident Financial Services, Inc. (NYSE:PFS): Savings & Loans Industry. Market cap of $839.79M. TTM operating cash flow/common equity at 0.11 vs. 5-year average at 0.07. MRQ total debt to assets at 0.00. TTM diluted EPS at $0.92, MRQ book value per share at $16.51, Graham number at $18.49 (vs. current price at $13.75, implies a potential upside of 34.45%). The stock is a short squeeze candidate, with a short float at 6.15% (equivalent to 12.1 days of average volume). The stock has gained 12.29% over the last year.
  3. Magna International, Inc. (NYSE:MGA): Auto Parts Industry. Market cap of $11.37B. TTM operating cash flow/common equity at 0.21 vs. 5-year average at 0.18. MRQ total debt to assets at 0.01. TTM diluted EPS at $4.50, MRQ book value per share at $35.15, Graham number at $59.66 (vs. current price at $44.98, implies a potential upside of 32.63%). The stock has performed poorly over the last month, losing 11.34%.
  4. International Rectifier Corporation (NYSE:IRF): Semiconductor Circuits Industry. Market cap of $1.71B. TTM operating cash flow/common equity at 0.12 vs. 5-year average at 0.05. MRQ total debt to assets at 0.00. TTM diluted EPS at $2.18, MRQ book value per share at $18.87, Graham number at $30.42 (vs. current price at $23.67, implies a potential upside of 28.53%). It's been a rough couple of days for the stock, losing 7.47% over the last week.
  5. Molina Healthcare Inc. (NYSE:MOH): Health Care Plans Industry. Market cap of $901.59M. TTM operating cash flow/common equity at 0.38 vs. 5-year average at 0.24. MRQ total debt to assets at 0.10. TTM diluted EPS at $1.52, MRQ book value per share at $16.63, Graham number at $23.85 (vs. current price at $19.05, implies a potential upside of 25.19%). The stock is a short squeeze candidate, with a short float at 9.7% (equivalent to 5.22 days of average volume). It's been a rough couple of days for the stock, losing 16.3% over the last week.
  6. Fairchild Semiconductor International Inc. (NASDAQ:FCS): Semiconductor Industry. Market cap of $1.86B. TTM operating cash flow/common equity at 0.29 vs. 5-year average at 0.20. MRQ total debt to assets at 0.15. TTM diluted EPS at $1.35, MRQ book value per share at $10.10, Graham number at $17.52 (vs. current price at $14.29, implies a potential upside of 22.57%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.45). It's been a rough couple of days for the stock, losing 5.8% over the last week.
  7. Pep Boys - Manny, Moe & Jack (NYSE:PBY): Auto Parts Stores Industry. Market cap of $533.55M. TTM operating cash flow/common equity at 0.21 vs. 5-year average at 0.13. MRQ total debt to assets at 0.19. TTM diluted EPS at $0.69, MRQ book value per share at $9.32, Graham number at $12.03 (vs. current price at $9.82, implies a potential upside of 22.49%). The stock is a short squeeze candidate, with a short float at 19.9% (equivalent to 11.76 days of average volume). It's been a rough couple of days for the stock, losing 9.96% over the last week.
  8. Briggs & Stratton Corp. (NYSE:BGG): Diversified Machinery Industry. Market cap of $810.41M. TTM operating cash flow/common equity at 0.22 vs. 5-year average at 0.17. MRQ total debt to assets at 0.16. TTM diluted EPS at $1.21, MRQ book value per share at $13.95, Graham number at $19.49 (vs. current price at $16.41, implies a potential upside of 18.76%). The stock is a short squeeze candidate, with a short float at 16.44% (equivalent to 18.69 days of average volume). It's been a rough couple of days for the stock, losing 8.12% over the last week.
  9. Systemax Inc. (NYSE:SYX): Technical & System Software Industry. Market cap of $606.14M. TTM operating cash flow/common equity at 0.24 vs. 5-year average at 0.17. MRQ total debt to assets at 0.03. TTM diluted EPS at $1.18, MRQ book value per share at $11.62, Graham number at $17.56 (vs. current price at $15.50, implies a potential upside of 13.32%). The stock is a short squeeze candidate, with a short float at 6.81% (equivalent to 12.98 days of average volume). The stock has gained 0.37% over the last year.
  10. Tyco International Ltd. (NYSE:TYC): Diversified Machinery Industry. Market cap of $20.32B. TTM operating cash flow/common equity at 0.18 vs. 5-year average at 0.13. MRQ total debt to assets at 0.16. TTM diluted EPS at $3.30, MRQ book value per share at $30.55, Graham number at $47.63 (vs. current price at $42.76, implies a potential upside of 11.38%). The stock has performed poorly over the last month, losing 11.45%.

*BVPS and EPS data sourced from Yahoo Finance, operating cash flow/common equity and total debt/assets data sourced from Screener.co, all other data sourcedf rom Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 10 Undervalued, Low-Debt Stocks With High Cash-Flow Growth