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One helpful way to find potentially undervalued opportunities is from the “godfather of value investing” himself, Benjamin Graham.

Graham created an equation to calculate the maximum fair value for a stock, referred to as the Graham Number. Any stock trading at a significant discount to this number would appear 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 used the Graham Number to screen for potentially undervalued stocks among the universe of stocks seeing significant increases in profitability, comparing the trailing-twelve-month net margin to the five-year average. We also screened for stocks trading at significant discounts to mean analyst target price.

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

We even 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 being undervalued by the market? Use this list as a starting-off point for your own analysis.

List sorted by potential upside implied by target price.

1. Weyerhaeuser Co. (NYSE:WY): REIT Industry. Market cap of $9.04B. TTM net margin at 22.14% vs. 5-year average at -1.45%. Target price at $22.01 vs. current price at $16.78 (implies a potential upside of 31.16%). TTM diluted EPS at $2.87, MRQ book value per share at $8.79, Graham number at $23.82 (vs. current price at $16.94, implies a potential upside of 40.64%). Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 3.58%, current ratio at 2.12, and quick ratio at 1.63. It's been a rough couple of days for the stock, losing 7.24% over the last week.

2. Boston Scientific Corporation (NYSE:BSX): Medical Instruments & Supplies Industry. Market cap of $9.70B. TTM net margin at 7.90% vs. 5-year average at -20.38%. Target price at $7.92 vs. current price at $6.35 (implies a potential upside of 24.78%). TTM diluted EPS at $0.40, MRQ book value per share at $7.55, Graham number at $8.24 (vs. current price at $6.43, implies a potential upside of 28.20%). The stock has performed poorly over the last month, losing 11.56%.

3. CapitalSource Inc. (NYSE:CSE): Credit Services Industry. Market cap of $1.86B. TTM net margin at 23.51% vs. 5-year average at -39.38%. Target price at $7.94 vs. current price at $5.77 (implies a potential upside of 37.56%). TTM diluted EPS at $0.32, MRQ book value per share at $6.53, Graham number at $6.86 (vs. current price at $5.61, implies a potential upside of 22.22%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.58). The stock has gained 11.18% over the last year.

4. National Penn Bancshares Inc. (NASDAQ:NPBC): Regional - Northeast Banks Industry. Market cap of $1.04B. TTM net margin at 17.48% vs. 5-year average at -12.27%. Target price at $9.08 vs. current price at $6.85 (implies a potential upside of 32.60%). TTM diluted EPS at $0.40, MRQ book value per share at $7.47, Graham number at $8.20 (vs. current price at $6.74, implies a potential upside of 21.65%). The stock is a short squeeze candidate, with a short float at 5.31% (equivalent to 10.51 days of average volume). It's been a rough couple of days for the stock, losing 8.67% over the last week.

*Net margin and price data sourced from Screener.co, EPS and BVPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 4 Highly Profitable Stocks Undervalued by Target Price and the Graham Number