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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 low-debt stocks that are also trading at significant discounts to target price.

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. Provident Financial Services, Inc. (NYSE:PFS): Savings & Loans Industry. Market cap of $744.87M. MRQ total debt to assets at 0.00. Target price at $15.60 vs. current price at $12.32 (implies a potential upside of 26.62%). TTM diluted EPS at $0.92, MRQ book value per share at $16.51, Graham number at $18.49 (vs. current price at $12.10, implies a potential upside of 52.78%). The stock is a short squeeze candidate, with a short float at 5.93% (equivalent to 10.62 days of average volume). The stock has performed poorly over the last month, losing 13.42%.

2. Curtiss-Wright Corp. (NYSE:CW): Aerospace/Defense Products & Services Industry. Market cap of $1.33B. MRQ total debt to assets at 0.19. Target price at $38.14 vs. current price at $28.55 (implies a potential upside of 33.60%). TTM diluted EPS at $2.59, MRQ book value per share at $26.76, Graham number at $39.49 (vs. current price at $28.31, implies a potential upside of 39.49%). The stock has performed poorly over the last month, losing 10.5%.

3. M&T Bank Corp. (NYSE:MTB): Regional Banks Industry. Market cap of $9.39B. MRQ total debt to assets at 0.10. Target price at $96.20 vs. current price at $74.80 (implies a potential upside of 28.61%). TTM diluted EPS at $7.10, MRQ book value per share at $66.73, Graham number at $103.25 (vs. current price at $74.03, implies a potential upside of 39.47%). The stock has performed poorly over the last month, losing 12.58%.

4. Harte-Hanks Inc. (NYSE:HHS): Marketing Services Industry. Market cap of $507.34M. MRQ total debt to assets at 0.19. Target price at $10.20 vs. current price at $8.08 (implies a potential upside of 26.24%). TTM diluted EPS at $0.73, MRQ book value per share at $7.04, Graham number at $10.75 (vs. current price at $7.81, implies a potential upside of 37.69%). The stock has lost 17.8% over the last year.

5. The Babcock & Wilcox Company (NYSE:BWC):
Diversified Machinery Industry. Market cap of $2.68B. MRQ total debt to assets at 0.00. Target price at $31.33 vs. current price at $22.78 (implies a potential upside of 37.55%). TTM diluted EPS at $2.78, MRQ book value per share at $15.40, Graham number at $31.04 (vs. current price at $22.79, implies a potential upside of 36.19%). The stock has had a couple of great days, gaining 10.64% over the last week.

6. F.N.B. Corporation (NYSE:FNB):
Regional Banks Industry. Market cap of $1.16B. MRQ total debt to assets at 0.12. Target price at $11.28 vs. current price at $9.16 (implies a potential upside of 23.16%). TTM diluted EPS at $0.68, MRQ book value per share at $9.59, Graham number at $12.11 (vs. current price at $9.02, implies a potential upside of 34.29%). The stock is a short squeeze candidate, with a short float at 12.19% (equivalent to 12.12 days of average volume). The stock has had a couple of great days, gaining 9.57% over the last week.

7. Western Digital Corp. (NASDAQ:WDC): Data Storage Devices Industry. Market cap of $7.31B. MRQ total debt to assets at 0.04. Target price at $44.00 vs. current price at $31.47 (implies a potential upside of 39.82%). TTM diluted EPS at $3.09, MRQ book value per share at $23.55, Graham number at $40.46 (vs. current price at $31.25, implies a potential upside of 29.48%). The stock has had a couple of great days, gaining 8.11% over the last week. The stock has performed poorly over the last month, losing 15.56%.

8. NYSE Euronext, Inc. (NYSE:NYX): Diversified Investments Industry. Market cap of $7.59B. MRQ total debt to assets at 0.16. Target price at $40.16 vs. current price at $28.97 (implies a potential upside of 38.62%). TTM diluted EPS at $2.17, MRQ book value per share at $27.32, Graham number at $36.52 (vs. current price at $28.44, implies a potential upside of 28.42%). The stock has had a couple of great days, gaining 14.14% over the last week. The stock has performed poorly over the last month, losing 15.66%.

9. NTT DOCOMO, Inc. (NYSE:DCM): Wireless Communications Industry. Market cap of $80.67B. MRQ total debt to assets at 0.06. Target price at $22.30 vs. current price at $18.49 (implies a potential upside of 20.60%). TTM diluted EPS at $1.59, MRQ book value per share at $15.42, Graham number at $23.49 (vs. current price at $18.52, implies a potential upside of 26.82%). The stock has had a couple of great days, gaining 7.69% over the last week.

10. AGCO Corporation (NYSE:AGCO):
Farm & Construction Machinery Industry. Market cap of $3.94B. MRQ total debt to assets at 0.12. Target price at $55.12 vs. current price at $40.84 (implies a potential upside of 34.97%). TTM diluted EPS at $3.70, MRQ book value per share at $32.24, Graham number at $51.81 (vs. current price at $40.86, implies a potential upside of 26.79%). The stock has had a couple of great days, gaining 14.08% over the last week. The stock has performed poorly over the last month, losing 15.58%.

11. Cytec Industries Inc. (NYSE:CYT): Specialty Chemicals Industry. Market cap of $2.37B. MRQ total debt to assets at 0.17. Target price at $62.17 vs. current price at $47.75 (implies a potential upside of 30.19%). TTM diluted EPS at $4.06, MRQ book value per share at $38.54, Graham number at $59.33 (vs. current price at $48.02, implies a potential upside of 23.56%). The stock is a short squeeze candidate, with a short float at 5.35% (equivalent to 5.81 days of average volume). The stock has had a couple of great days, gaining 8.23% over the last week. The stock has performed poorly over the last month, losing 14.59%.

12. City National Corp. (NYSE:CYN): Regional Industry. Market cap of $2.33B. MRQ total debt to assets at 0.04. Target price at $58.34 vs. current price at $43.82 (implies a potential upside of 33.14%). TTM diluted EPS at $3.02, MRQ book value per share at $39.24, Graham number at $51.64 (vs. current price at $42.90, implies a potential upside of 20.37%). The stock has performed poorly over the last month, losing 16.5%.

13. U.S. Bancorp (NYSE:USB): Regional Banks Industry. Market cap of $43.66B. MRQ total debt to assets at 0.19. Target price at $30.72 vs. current price at $22.73 (implies a potential upside of 35.17%). TTM diluted EPS at $2.06, MRQ book value per share at $15.50, Graham number at $26.80 (vs. current price at $22.45, implies a potential upside of 19.39%). The stock has had a couple of great days, gaining 5.28% over the last week.

14. CVS Caremark Corporation (NYSE:CVS): Drug Stores Industry. Market cap of $45.72B. MRQ total debt to assets at 0.17. Target price at $43.06 vs. current price at $34.00 (implies a potential upside of 26.64%). TTM diluted EPS at $2.46, MRQ book value per share at $28.41, Graham number at $39.65 (vs. current price at $33.78, implies a potential upside of 17.39%). The stock has had a couple of great days, gaining 5.23% over the last week.

15. UniFirst Corp. (NYSE:UNF): Textile Clothing Industry. Market cap of $1.0B. MRQ total debt to assets at 0.15. Target price at $63.00 vs. current price at $50.46 (implies a potential upside of 24.85%). TTM diluted EPS at $3.81, MRQ book value per share at $39.22, Graham number at $57.98 (vs. current price at $49.77, implies a potential upside of 16.50%). The stock has had a couple of great days, gaining 6.21% over the last week. The stock has performed poorly over the last month, losing 13.01%.

16. Raymond James Financial Inc. (NYSE:RJF): Investment Brokerage Industry. Market cap of $3.53B. MRQ total debt to assets at 0.05. Target price at $37.29 vs. current price at $27.89 (implies a potential upside of 33.69%). TTM diluted EPS at $2.20, MRQ book value per share at $20.22, Graham number at $31.64 (vs. current price at $27.50, implies a potential upside of 15.04%). The stock has had a couple of great days, gaining 6.65% over the last week. The stock has performed poorly over the last month, losing 10.92%.

17. Tyco International Ltd. (NYSE:TYC):
Diversified Machinery Industry. Market cap of $19.23B. MRQ total debt to assets at 0.16. Target price at $53.47 vs. current price at $41.41 (implies a potential upside of 29.12%). TTM diluted EPS at $3.30, MRQ book value per share at $30.55, Graham number at $47.63 (vs. current price at $41.58, implies a potential upside of 14.54%). The stock has had a couple of great days, gaining 9.52% over the last week. The stock has performed poorly over the last month, losing 12.34%.

18. Nokia Corporation (NYSE:NOK): Communication Equipment Industry. Market cap of $24.02B. MRQ total debt to assets at 0.16. Target price at $7.74 vs. current price at $6.29 (implies a potential upside of 23.02%). TTM diluted EPS at $0.47, MRQ book value per share at $4.74, Graham number at $7.08 (vs. current price at $6.22, implies a potential upside of 13.83%). The stock has recently rebounded, and is currently trading 12.24% above its SMA20 and 5.78% above its SMA50. However, the stock still trades 24.11% below its SMA200. The stock has had a couple of great days, gaining 28.89% over the last week.

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

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

Source: 18 Low-Debt Stocks Undervalued by Target Price and the Graham Number