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The forward P/E ratio is a price-multiple valuation that slightly differs from the standard P/E ratio. The difference is that it uses forecasted earnings in the equation. While this may not be as reliable as current earnings information, it does provide insight into the future earnings expectations of analysts who cover the firm.

Return on equity (ROE) helps investors to potentially indentify competitively advantageous companies. This ratio illustrates the actual return on shareholders' equity and break down the firm into several components. When looking at the individual components of ROE, this ratio makes it easier to see which parts of the firm are potentially underperforming or overly reliant upon.

We ran a screen for mid cap stocks with a forward P/E of less than 10. From this narrowed pool, we then screened for firms that have a return on equity (TTM) of at least 20% or higher.

The forward P/E ranks the firms highest to lowest:

1. Cooper Industries PLC. (CBE)

Sector

Industrials

Industry

Diversified Industrials

Market Cap

$7,373M

Beta

1.57

The company manufactures electrical products and tools worldwide. The firm has a forward P/E of 9.99. CBE’s ROE 23.47%. The short interest was 0.70% as of 08/15/2011.

2. Cosan Ltd (CZZ)

Sector

Consumer Defensive

Industry

Farm Products

Market Cap

$3,064M

Beta

2.09

The company produces ethanol and sugar in Brazil. The firm has a forward P/E of 9.97. CZZ’s ROE is 45.94%. The short interest was N/A as of 08/15/2011.

3. Darden Restaurants Inc (DRI)

Sector

Consumer Cyclical

Industry

Restaurants

Market Cap

$5,839M

Beta

0.88

The company operates a chain of restaurants that include Red Lobster, Olive Garden, and more. The firm has a forward P/E of 9.90. DRI’s ROE is 24.87%. The short interest was 5.10% as of 08/15/2011.

4. Herman Miller, Inc. (MLHR)

Sector

Industrials

Industry

Business Equipment

Market Cap

1,002M

Beta

1.26

The company design and manufactures interior furnishings. The firm has a forward P/E of 9.4. MLHR’s ROE is 9.87%. The short interest was N/A as of 08/15/2011.

5. Belden, Inc. (BDC)

Sector

Industrials

Industry

Diversified Industrials

Market Cap

$1,361M

Beta

2.01

The company produces specialty electronic and data network products. The firm has a forward P/E of 9.76. BDC’s ROE is 21.16%. The short interest was 5.20% as of 08/15/2011.

6. Pan American Silver Corporation (PAAS)

Sector

Basic Materials

Industry

Silver

Market Cap

$3,620M

Beta

1.38

The company develops and mines silver properties. The firm has a forward P/E of 9.69. PAAS’s ROE is 20.00%. The short interest was N/A as of 08/15/2011.

7. Albemarle Corp (ALB)

Sector

Basic Materials

Industry

Specialty Chemicals

Market Cap

$4,206M

Beta

1.58

The company offers specialty chemicals and more. The firm has a forward P/E of 9.66. ALB’s ROE is 27.32%. The short interest was 2.30% as of 08/15/2011.

8. Rockwood Holdings Inc (ROC)

Sector

Specialty Chemicals

Industry

Basic Materials

Market Cap

$3,464M

Beta

3.03

The company sells advanced specialty chemicals and materials for a variety of uses. The firm has a forward P/E of 9.63. ROC’s ROE is 38.18%. The short interest was 2.90% as of 08/15/2011.

9. CTC Media, Inc. (CTCM)

Sector

Broadcasting - TV

Industry

Consumer Cyclical

Market Cap

$2,147M

Beta

2.64

The company is a Russian television network. The firm has a forward P/E of 9.61. CTCM’s ROE is 20.29%. The short interest was N/A as of 08/15/2011.

10. American Capital Ltd (ACAS)

Sector

Financial Services

Industry

Asset Management

Market Cap

$2,873M

Beta

2.52

The company is a business development and alternative asset manager. The firm has a forward P/E of 9.55. ACAS’s ROE is 35.90%. The short interest was 2.90% as of 08/15/2011.

We hope this list helps investors as they do their own due diligence on mid cap companies.

Source: 10 Undervalued Companies Posting Strong Shareholder Returns