One helpful measure of cash-flow growth is the ratio operating cash flow/common equity. Dividing by common equity helps express cash flows as a return to shareholder investment, and it standardizes the ratio for comparison between firms of different sizes. When a company sees increases in this ratio across time, it indicates stronger cash flows.
We ran a screen on stocks seeing stronger cash flows, comparing the trailing-twelve-month operating cash flow/common equity to the company’s five-year average. We screened these companies for those that appear highly undervalued, with lower TTM P/E, TTM P/CF, and PEG than their industry peers.
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 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.
click on image to enlarge
Do you think these stocks are undervalued? Use this list as a starting-off point for your own analysis.
List sorted by market cap:
1. Lockheed Martin Corporation (NYSE:LMT): Aerospace/defense products and services industry. Market cap of $23.29 billion. TTM P/E at 9.20 vs. industry average at 14.83. PEG at 0.97 vs. industry average at 1.29. TTM P/CF at 6.85 vs. industry average at 9.18. TTM operating cash flow/common equity at 0.91 vs. 5-year average at 0.65. The stock has performed poorly over the last month, losing 13.44%.
2. Netflix, Inc. (NASDAQ:NFLX): Music and video stores Industry. Market cap of $10.78 billion. TTM P/E at 52.08 vs. industry average at 67.51. PEG at 1.66 vs. industry average at 2.10. TTM P/CF at 15.27 vs. industry average at 37.57. TTM operating cash flow/common equity at 1.34 vs. 5-year average at 0.86. It's been a rough couple of days for the stock, losing 15.9% over the last week.
3. Partner Communications Company Ltd. (NASDAQ:PTNR): Wireless communications industry. Market cap of $1.67 billion. TTM P/E at 5.19 vs. industry average at 6.15. PEG at 1.38 vs. industry average at 2.51. TTM P/CF at 3.09 vs. industry average at 7.38. TTM operating cash flow/common equity at 2.98 vs. 5-year average at 1.13. The stock has performed poorly over the last month, losing 28.08%.
4. Coinstar Inc. (NASDAQ:CSTR): Specialty retail industry. Market cap of $1.25 billion. TTM P/E at 14.60 vs. industry average at 17.0. PEG at 0.77 vs. industry average at 1.53. TTM P/CF at 5.74 vs. industry average at 12.67. TTM operating cash flow/common equity at 0.73 vs. 5-year average at 0.45. The stock is a short squeeze candidate, with a short float at 34.27% (equivalent to 9.32 days of average volume). The stock has performed poorly over the last month, losing 30.79%.
5. Strayer Education Inc. (NASDAQ:STRA): Education and training services industry. Market cap of $1.06 billion. TTM P/E at 9.06 vs. industry average at 17.0. PEG at 1.17 vs. industry average at 1.53. TTM P/CF at 7.92 vs. industry average at 12.67. TTM operating cash flow/common equity at 1.22 vs. 5-year average at 0.60. The stock is a short squeeze candidate, with a short float at 23.01% (equivalent to 8.56 days of average volume). It's been a rough couple of days for the stock, losing 12.99% over the last week.
*Price multiples sourced from Fidelity, 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.