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Ever heard the phrase, “There is more than one way to skin a cat”? When it comes to the topic of profitability the idea here couldn’t be more true. Now of course you can do the standard act of reviewing profitability ratios on the Income Statement but you can also review Return on Equity. ROE is a performance ratio that illustrates profitability relative to the shareholder.

When looking at price-multiple ratios everyone generally has heard of and uses the Price/Earnings Ratio. One ratio that doesn’t come up in conversations quite as much is the Price/Cash Flow Ratio. This ratio is somewhat similar to the P/E ratio but a key difference is that it removes items such as depreciation and other non-cash factors. Also, it focuses on how much cash a firm has actually received as opposed to earned.

We ran a screen on companies that have outperformed the S&P 500 (NYSEARCA:SPY) this year and still have a low P/CFO Ratio (X<10). From this narrowed pool we then screened for firms that had a strong ROE (X>15).

1. China Southern Airlines Compan (NYSE:ZNH)

Sector

Industrials

Industry

Airlines

Market Cap

$6627M

Beta

1.51

Analyst Sentiment

9/18 -List Buy/Outperform (Bullish)

The company provides flights within the People's Republic of China, Hong Kong, Macau, Taiwan, and other parts of the world. The Price/Cash Flow is 3.13. ZNH’s Return on Equity is 31.27%. The YTD Return is 10.62%. The short interest for the company is NA as of 8/15/2011.

2. China Eastern Airlines Corporation (NYSE:CEA)

Sector

Industrials

Industry

Airlines

Market Cap

$5433M

Beta

2

Analyst Sentiment

8/17 -List Buy/Outperform (Bullish)

The company provides commercial transportation throughout China and beyond. The Price/Cash Flow is 3.19. CEA’s Return on Equity is 55.29%. The YTD Return is -5.23%. The short interest is N/A as of 8/15/2011.

3. Kulicke & Soffa Industries Inc (NASDAQ:KLIC)

Sector

Technology

Industry

Semiconductor Equipment & Materials

Market Cap

$620M

Beta

2.93

Analyst Sentiment

3/4-List Buy/Outperform (Bullish)

The company designs and sells capital equipment and expendable tools for the technology sector. The Price/Cash Flow is 3.64. KLIC’s Return on Equity is 49.84%. The YTD Return is 18.47%. The short interest for the company is 6% as of 8/15/2011.

4. National Grid PLC (NYSE:NGG)

Sector

Utilities

Industry

Utilities - Regulated Electric

Market Cap

$36505M

Beta

0.65

Analyst Sentiment

N/A


The company owns and regulates electricity and gas infrastructure in the US & UK. NGG’s Price/Cash Flow is 4.22. Return on Equity is 32.57%. The YTD Return is 17.01%. The short interest is N/A as of 8/15/2011.

5. Gruma SAB de CV (NYSE:GMK)

Sector

Consumer Defensive

Industry

Packaged Foods

Market Cap

$1015M

Beta

3

Analyst Sentiment

2/2 -List Hold/Neutral (Neutral)

The company makes and sells tortillas, corn flour, wheat flour, and related products. The Price/Cash Flow is 4.67. GMK’s Return on Equity is 51.8%. The company's YTD Return % is -2.7. The short interest for the firm is N/A as of 8/15/2011.

6. Bridgepoint Education, Inc. (NYSE:BPI)

Sector

Consumer Defensive

Industry

Education & Training Services

Market Cap

$1180M

Beta

2.29

Analyst Sentiment

6/10 -List Buy/Outperform (Bullish)

The company offers postsecondary education services. The Price/Cash Flow is 5.04. BPI’s Return on Equity is 65.64%. The YTD Return is 18.26%. The short interest for the company is 61% as of 8/15/2011.

7. HollyFrontier Corp (NYSE:HFC)

Sector

Energy

Industry

Oil & Gas Refining & Marketing

Market Cap

$7388M

Beta

0.66

Analyst Sentiment

N/A

The company is an independent petroleum refiner and marketer in the United States. HFC’s Price/Cash Flow is 5.38. The Return on Equity is 42.76%. The YTD Return is 75.72%. The short interest is 10% as of 8/15/2011.

8. Alliance Holdings GP, L.P. (NASDAQ:AHGP)

Sector

Basic MaterialsBasic Matls

Industry

Industrial Metals & Minerals

Market Cap

$2800M

Beta

0.87

Analyst Sentiment

2/4 -List Hold/Neutral (Neutral)

The company produces and sells coal primarily to utilities and industrial users in the US. The Price/Cash Flow is 5.39. AHGP’s Return on Equity is 52.87%. The YTD Return is 0.63%. The short interest is 1% as of 8/15/2011.

9. Eli Lilly and Company (NYSE:LLY)

Sector

HealthcareHealthcare

Industry

Drug Manufacturers - Major

Market Cap

$41364M

Beta

0.86

Analyst Sentiment

12/18 -List Hold/Neutral (Neutral)

The company develops and sells pharmaceutical products worldwide. The Price/Cash Flow is 5.5. Return on Equity is 38.55%. The YTD Return % is 6.16. The short interest is 3% as of 8/15/2011.

We hope this list helps investors as they do their own due diligence on undervalued companies that are still managing to beat the market.

Source: 9 Cheap Stocks With Bullish Trends and Impressive Profitability