A slowing economy, debt crisis, and Greece default crisis have put a lot of pressure on investors to look for investments which are undervalued and have high growth potential. We will take a look at some of the companies which we feel might fit into investors' search criteria:
Advanced Battery Technologies Inc. (OTCPK:ABAT)
Over the last few months ABAT investors saw the stock's share price plummet from a year-to-date high of $3.81 to all time low of $0.81. However, the organization has recovered substantially since then, and was trading at $1.13 at the time of writing with a P/E of 1.88.
ABAT has a very strong balance sheet, with cash and cash equivalents of $86 million in the last quarter-- almost 33% of its total assets. ABAT overall has performed very well in the last few years. During the last five years ABAT's revenue has increased on average by 35%, and EPS has increased by 20%, compounded annually. ABAT's investor performance matrix is better than its key competitor, China BAK Battery (NASDAQ:CBAK). By comparison, ABAT's ROA, ROE and ROI are 19.06%, 21.76%, and 19.71% respectively. In my opinion, management of ABAT thinks that the company is undervalued and, as a result, was involved in a $10 million share buy back program. Overall, the company has very strong fundamentals and a sound balance sheet to power its growth and meet its debt commitments in the future.
Armour Residential REIT Inc. (NYSE:ARR)
REITs are known for a high dividend yield and stable source of income. ARR lives up to this reputation. ARR has a dividend yield of 18.95%, which is greater than that of its competitors, Walter Investment Management (NYSE:WAC) with a yield of 8.43%, and Anworth Mortgage Asset (NYSE:ANH), with a yield of 14.03%. ARR has a current P/E of 8.9. The estimated earnings of $1.29 for the current fiscal year give ARR a share price of $12.09, making the company undervalued by approximately 40%. A DCF analysis puts the current price per share at 40% above the current price. Over the last few quarters, the company has increased its investing activities. The company is engaged in purchasing highly stable and secure mortgage securities backed by the US government, giving it a very steady and reliable source of income. Overall, with housing starts increasing in the month of July and increasing demand for high dividend yielding instruments, ARR's shares are poised to go up in the near future.
Sirius XM Radio Inc. (NASDAQ:SIRI)
SIRI's stock is trading at 52 week low of $1.65, after touching a year-to-date high of $2.33 a couple of weeks back. However, this decline is not due to the fact that the fundamentals of the company have been affected, but it is more due to the growing concern about the slowing economy and the credit rating downgrade. During the last five quarters the company has increased its operating cash flow from $140 million to $213 million, and net income now stands at $173 million. SIRI's interest coverage ratio of 2.1 indicates that the company should not have any problem meeting its current or future obligations. Over the last couple of years, SIRI has been trying to penetrate the used car market, which will increase its market share further and increase the total revenue. The company is expected to exceed its target of adding 1.6 million new subscribers in the current year, which will increase its revenue to $3 billion and free cash flow from operations to $400 million for this fiscal year. With the auto market showing signs of stability and penetration of satellite radio increasing, SIRI should see its share price go up.
Mitsubishi UFJ Financial Group Inc. (NYSE:MTU)
MTU has seen its shares decline from a year-to-date high of $5.60 to a current price of $4.57. The company is trading at a price to earnings ratio of 11.50, which is far lower than that of its stateside competitors, Morgan Stanley (NYSE:MS), with a ratio of 28, and KB Financial (NYSE:KB), with a price to earnings ratio of 25. MTU has a dividend yield of 2.87%, which is higher than both of these competitors. The company has steadily increased its cash flow from operating activities over the last five years at an annualized rate of 13%. Over the next five years, the company is expected to grow at a rate of 3.90%. Growth expectations have increased twice in the last few months. Overall, the decline in the share price of the company is due to macro factors: the panic in the market, and this March's catastrophic events in Japan. The company has a beta of 0.90, making it a low risk investment and ideal for investors looking for low risk and high return.
AEGON N.V. (NYSE:AEG)
AEG is a highly diversified company with a presence in over twenty countries. ING Groep NV (NYSE:ING) and MetLife Inc (NYSE:MET) are two key competitors. AEG has a market capitalization of about $10.66 billion with about 1.91 billion shares outstanding. The company is trading at $4.25, having lost 25% of its value since the ongoing debt crisis. AEG's price to earnings ratio of 4.6 is far below that of competitor, Metlife, which has a ratio of 14. AEG, like every other financial company, took a beating in the latest financial crisis; however, during the last five quarters it has bounced back. Its revenues, at $49 billion in 2010, are greater than pre-crisis revenue levels in 2008. With a debt to asset ratio of 2.6 and a debt to equity ratio of 36, the company is in strong financial condition to support its current share price.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.