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Financial stocks may look bleak but that doesn’t mean there might not be opportunity out there for the opportunistic and patient investor. So how does any investor spot a potential diamond in the rough in the trash bin you ask? We like to start by reviewing a company’s P/CFO ratio when starting off on a treasure hunt that involves digging through junk.

The P/CFO ratio measures the market’s expectations of a company’s future financial health and cash flow from operations based off its current operations. A key advantage with this ratio is that it removes non-cash factors and depreciation, which helps provide a clear picture of how much cash a company is actually bringing in relative to the stock price.

We ran a screen for financial companies that have underperformed the S&P 500 over the last month. From this narrowed pool we then screened for companies that appeared cheap relative to their P/CFO ratio (X<10).

The list is ranked from lowest to highest by the P/CFO ratio:

1. Royal Bank of Scotland Group (RBS)

Sector

Financial Services

Industry

Banks - Global

Market Cap

$19905 million

Beta

2.79

Analyst Sentiment

N/A

The company offers banking and financial services to personal, commercial, corporate, and institutional customers in the UK, US, and beyond. The company’s P/CFO ratio is 0.58. RBS’s 1-month return is -36.59%. The short interest for the company is N/A as of 8/15/2011.

2. PHH Corporation (PHH)

Sector

Financial Services

Industry

Credit Services

Market Cap

$1009 million

Beta

1.63

Analyst Sentiment

3/3-List Buy/Outperform (Bullish)

The company offers a mortgage and fleet management outsourcing services in North America. The company’s P/CFO ratio is 0.64. PHH’s 1-month return is -6.67%. The short interest for the company is 14% as of 8/15/2011.

3. Barclays PLC (BCS)

Sector

Financial Services

Industry

Banks - Global

Market Cap

$30138 million

Beta

2.8

Analyst Sentiment

N/A

The company provides various financial products and services all over the world. The company’s P/CFO ratio is 0.72. BCS’s 1-month return is -28.69%. The short interest for the company is N/A as of 8/15/2011.

4. Bank of America Corporation (BAC)

Sector

Financial Services

Industry

Banks - Regional - US

Market Cap

$70636 million

Beta

2.45

Analyst Sentiment

17/34-List Hold/Neutral (Neutral)

The company offers banking and non-banking financial services to a variety of clients in the US and abroad. The company’s P/CFO ratio is 0.74. BAC’s 1-month return is -27.17%. The short interest for the company is 1.3% as of 8/15/2011.

5. Regions Financial Corporation (RF)

Sector

Financial Services

Industry

Banks - Regional - US

Market Cap

4859 million

Beta

1.15

Analyst Sentiment

19/25-List Hold/Neutral (Neutral)

The company offers retail, commercial and mortgage banking services in the US. The company’s P/CFO ratio is 1.14. RF’s 1-month return is -34.58%. The short interest for the company is 3% as of 8/15/2011.

6. Mitsubishi UFJ Financial Group (MTU)

Sector

Financial Services

Industry

Banks - Global

Market Cap$

64066 million

Beta

0.93

Analyst Sentiment

12/14-List Buy/Outperform (Bullish)

The company offers various financial services to a variety of clients in Japan and internationally. The company’s P/CFO ratio is 1.15. MTU’s 1-month return is -6.4%. The short interest for the company is N/A as of 8/15/2011.

7. KB Financial Group Inc (KB)

Sector

Financial Services

Industry

Banks - Regional - Asia

Market Cap

$13346 million

Beta

2.16

Analyst Sentiment

26/27-List Buy/Outperform (Bullish)

The company is a holding company for Kookmin Bank, which offers financial products and services in Korea. The company’s P/CFO ratio is 1.39. KB’s 1-month return is -22.93%. The short interest for the company is N/A as of 8/15/2011.

8. Bbva Banco Frances,S.A. (BFR)

Sector

Financial Services

Industry

Banks - Regional - Latin America

Market Cap

$1380 million

Beta

1.63

Analyst Sentiment

4/5-List Hold/Neutral (Neutral)

The company offers financial services to corporate and retail clients in Argentina. The company’s P/CFO ratio is 1.41. BFR’s 1-month return is -20.33%. The short interest for the company is N/A as of 8/15/2011.

9. Synovus Financial Corp (SNV)

Sector

Financial Services

Industry

Banks - Regional - US

Market Cap

$1068 million

Beta

0.99

Analyst Sentiment

21/29-List Hold/Neutral (Neutral)

The company offers diversified financial services in the south east US. The company’s P/CFO ratio is 1.41. SNV’s 1-month return is -31.82%. The short interest for the company is 8% as of 8/15/2011.

10. Cowen Group, Inc. (COWN)

Sector

Financial Services

Industry

Capital Markets

Market Cap

378 million

Beta

1.12

Analyst Sentiment

1/2-List Hold/Neutral (Neutral)

The company is an asset management holding company. The company’s P/CFO ratio is 1.42. SNV’s 1-month return is -17.72%. The short interest for the company is 18.8% as of 8/15/2011.

We hope this list helps investors as they do their own due diligence on financial stocks that appear undervalued.

Source: 10 Oversold, Undervalued Financial Stocks With Rebound Potential