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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 dividend stocks trading at significant discounts to their mean analyst 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 should be trading higher? Use this list as a starting-off point for your own analysis.

List sorted by upside implied by the Graham number.

1. Best Buy Co. Inc. (NYSE:BBY): Operates as a retailer of consumer electronics, home office products, entertainment products, appliances, and related services primarily in the United States, Europe, Canada, and China. Market cap of $9.39B. Dividend yield at 2.40%, payout ratio at 31.69%. Target price at $31.25 vs. current price at $25.10 (implies a potential upside of 24.50%). TTM Diluted EPS at $2.99, MRQ Book Value Per Share at $18.31, Graham number at $35.10 (vs. current price at $25.10, implies a potential upside of 39.83%). The stock has lost 33.33% over the last year.

2. Sandy Spring Bancorp Inc. (NASDAQ:SASR):
Operates as the holding company for Sandy Spring Bank, which offers a range of commercial banking, retail banking, and trust services to individuals and businesses in Maryland. Market cap of $381.50M. Dividend yield at 2.03%, payout ratio at 23.46%. Target price at $19.38 vs. current price at $15.83 (implies a potential upside of 22.39%). TTM Diluted EPS at $1.19, MRQ Book Value Per Share at $17.58, Graham number at $21.70 (vs. current price at $15.83, implies a potential upside of 37.05%). The stock has lost 3.42% over the last year.

3. Invesco Ltd. (NYSE:IVZ):
Provides its services to individuals, typically high net worth individuals. Market cap of $8.12B. Dividend yield at 2.73%, payout ratio at 31.09%. Target price at $25.06 vs. current price at $18.02 (implies a potential upside of 39.08%). TTM Diluted EPS at $1.47, MRQ Book Value Per Share at $18.16, Graham number at $24.51 (vs. current price at $18.02, implies a potential upside of 36.0%). The stock has had a couple of great days, gaining 8.42% over the last week.

4. Trustmark Corporation (NASDAQ:TRMK):
Operates as the bank holding company for Trustmark National Bank, which provides banking and financial solutions to individuals and corporate institutions in Florida, Mississippi, Tennessee, and Texas. Market cap of $1.25B. Dividend yield at 4.72%, payout ratio at 47.07%. Target price at $24.19 vs. current price at $19.55 (implies a potential upside of 23.72%). TTM Diluted EPS at $1.66, MRQ Book Value Per Share at $18.60, Graham number at $26.36 (vs. current price at $19.55, implies a potential upside of 34.82%). The stock is a short squeeze candidate, with a short float at 9.58% (equivalent to 14.26 days of average volume). The stock has lost 4.68% over the last year.

5. CME Group Inc. (NASDAQ:CME):
Operates the CME, CBOT, NYMEX, and COMEX regulatory exchanges worldwide. Market cap of $17.77B. Dividend yield at 2.11%, payout ratio at 31.97%. Target price at $335.41 vs. current price at $265.80 (implies a potential upside of 26.19%). TTM Diluted EPS at $17.79, MRQ Book Value Per Share at $313.52, Graham number at $354.25 (vs. current price at $265.80, implies a potential upside of 33.28%). The stock has had a good month, gaining 11.04%.

6. Cabot Corp. (NYSE:CBT):
Provides specialty chemicals and performance materials worldwide. Market cap of $2.06B. Dividend yield at 2.30%, payout ratio at 19.30%. Target price at $43.40 vs. current price at $31.42 (implies a potential upside of 38.13%). TTM Diluted EPS at $3.35, MRQ Book Value Per Share at $23.09, Graham number at $41.72 (vs. current price at $31.42, implies a potential upside of 32.78%). It's been a rough couple of days for the stock, losing 5.13% over the last week.

7. Sims Metal Management Limited (SMS):
Operates in the metal recycling industry. Market cap of $2.80B. Dividend yield at 3.49%, payout ratio at 33.12%. Target price at $18.45 vs. current price at $13.84 (implies a potential upside of 33.33%). TTM Diluted EPS at $0.97, MRQ Book Value Per Share at $14.73, Graham number at $17.93 (vs. current price at $13.62, implies a potential upside of 31.64%). The stock is currently stuck in a downtrend, trading 10.51% below its SMA20, 17.75% below its SMA50, and 25.52% below its SMA200. The stock has lost 19.6% over the last year.

8. Standard Motor Products Inc. (NYSE:SMP):
Distributes replacement parts for motor vehicles in the automotive aftermarket industry primarily in the United States, Canada, and Latin America. Market cap of $315.88M. Dividend yield at 2.03%, payout ratio at 11.68%. Target price at $17.00 vs. current price at $13.80 (implies a potential upside of 23.19%). TTM Diluted EPS at $1.40, MRQ Book Value Per Share at $10.36, Graham number at $18.06 (vs. current price at $13.80, implies a potential upside of 30.90%). This is a risky stock that is significantly more volatile than the overall market (beta = 2.33). The stock has had a couple of great days, gaining 5.83% over the last week.

9. NBT Bancorp, Inc. (NASDAQ:NBTB):
Provides commercial banking and financial services to individuals, corporations, and municipalities in central and upstate New York, northeastern Pennsylvania, and the greater Burlington, Vermont area. Market cap of $631.16M. Dividend yield at 4.27%, payout ratio at 46.67%. Target price at $24.33 vs. current price at $18.79 (implies a potential upside of 29.50%). TTM Diluted EPS at $1.68, MRQ Book Value Per Share at $15.94, Graham number at $24.55 (vs. current price at $18.79, implies a potential upside of 30.64%). The stock has lost 12.89% over the last year.

10. Applied Materials Inc. (NASDAQ:AMAT):
Provides manufacturing equipment, services, and software to the semiconductor, flat panel display, solar photovoltaic (PV), and related industries worldwide. Market cap of $14.80B. Dividend yield at 2.86%, payout ratio at 22.27%. Target price at $13.89 vs. current price at $11.23 (implies a potential upside of 23.73%). TTM Diluted EPS at $1.45, MRQ Book Value Per Share at $6.49, Graham number at $14.55 (vs. current price at $11.23, implies a potential upside of 29.57%). Might be undervalued at current levels, with a PEG ratio at 0.79, and P/FCF ratio at 8.72. The stock has gained 2.93% over the last year.

11. General Dynamics Corp. (NYSE:GD):
Provides business aviation, combat vehicles, weapons systems and munitions, military and commercial shipbuilding, and communications and information technology products and services worldwide. Market cap of $21.77B. Dividend yield at 3.13%, payout ratio at 25.53%. Target price at $81.21 vs. current price at $60.17 (implies a potential upside of 34.97%). TTM Diluted EPS at $7.01, MRQ Book Value Per Share at $38.49, Graham number at $77.92 (vs. current price at $60.17, implies a potential upside of 29.49%). The stock has lost 3.01% over the last year.

12. Time Warner Inc. (NYSE:TWX): Operates as a media and entertainment company in the United States and internationally. Market cap of $32.15B. Dividend yield at 3.06%, payout ratio at 39.91%. Target price at $40.85 vs. current price at $30.77 (implies a potential upside of 32.75%). TTM Diluted EPS at $2.32, MRQ Book Value Per Share at $30.15, Graham number at $39.67 (vs. current price at $30.77, implies a potential upside of 28.93%). The stock has had a couple of great days, gaining 5.38% over the last week.

13. Artio Global Investors Inc. (NYSE:ART):
A publicly owned asset management holding company. Market cap of $447.67M. Dividend yield at 3.20%, payout ratio at 16.56%. Target price at $10.14 vs. current price at $7.51 (implies a potential upside of 35.06%). TTM Diluted EPS at $1.52, MRQ Book Value Per Share at $2.56, Graham number at $9.36 (vs. current price at $7.51, implies a potential upside of 24.59%). The stock is a short squeeze candidate, with a short float at 7.87% (equivalent to 6.82 days of average volume). It's been a rough couple of days for the stock, losing 6.94% over the last week.

14. BB & T Corp. (NYSE:BBT):
Operates as the financial holding company for Branch Banking and Trust Company that provides banking and trust services to small and mid-size businesses, public agencies, local governments, and individuals in the United States. Market cap of $15.25B. Dividend yield at 2.93%, payout ratio at 35.18%. Target price at $27.59 vs. current price at $21.88 (implies a potential upside of 26.10%). TTM Diluted EPS at $1.35, MRQ Book Value Per Share at $24.37, Graham number at $27.21 (vs. current price at $21.88, implies a potential upside of 24.35%). The stock has had a good month, gaining 10.56%.

15. Umpqua Holdings Corporation (NASDAQ:UMPQ): Operates as the bank holding company for Umpqua Bank that provides commercial and retail banking services to corporate, institutional, and individual customers primarily in the areas of Oregon, northern California, and Washington. Market cap of $1.09B. Dividend yield at 2.10%, payout ratio at 32.52%. Target price at $12.83 vs. current price at $9.55 (implies a potential upside of 34.38%). TTM Diluted EPS at $0.41, MRQ Book Value Per Share at $14.62, Graham number at $11.61 (vs. current price at $9.55, implies a potential upside of 21.61%). The stock is a short squeeze candidate, with a short float at 7.26% (equivalent to 8.52 days of average volume). The stock has lost 17.88% over the last year.

16. Hudson Valley Holding Corp. Com (NYSE:HVB): Operates as the holding company for Hudson Valley Bank, which provides banking and related services to businesses, professionals, municipalities, not-for-profit organizations, and individuals in New York. Market cap of $330.28M. Dividend yield at 3.22%, payout ratio at 35.72%. Target price at $25.33 vs. current price at $18.66 (implies a potential upside of 35.76%). TTM Diluted EPS at $1.33, MRQ Book Value Per Share at $16.72, Graham number at $22.37 (vs. current price at $18.66, implies a potential upside of 19.87%). The stock has gained 0.76% over the last year.

17. Old National Bancorp. (NASDAQ:ONB): Operates as a holding company for Old National Bank, which provides financial services to individuals and commercial customers primarily in Indiana, eastern and southeastern Illinois, and central and western Kentucky. Market cap of $916.23M. Dividend yield at 2.90%, payout ratio at 38.98%. Target price at $11.98 vs. current price at $9.67 (implies a potential upside of 23.84%). TTM Diluted EPS at $0.56, MRQ Book Value Per Share at $10.64, Graham number at $11.58 (vs. current price at $9.67, implies a potential upside of 19.74%). The stock is a short squeeze candidate, with a short float at 6.52% (equivalent to 7.9 days of average volume). The stock has lost 6.93% over the last year.

18. Avery Dennison Corporation (NYSE:AVY): Produces pressure-sensitive materials, office products, tickets, tags, labels, and other converted products. Market cap of $2.90B. Dividend yield at 3.66%, payout ratio at 36.10%. Target price at $37.17 vs. current price at $27.39 (implies a potential upside of 35.69%). TTM Diluted EPS at $2.78, MRQ Book Value Per Share at $17.05, Graham number at $32.66 (vs. current price at $27.39, implies a potential upside of 19.23%). The stock has had a couple of great days, gaining 6.25% over the last week.

19. Greif, Inc. (NYSE:GEF): Engages in the manufacture and sale of industrial packaging products, and containerboard and corrugated products worldwide. Market cap of $2.24B. Dividend yield at 3.56%, payout ratio at 39.04%. Target price at $64.00 vs. current price at $47.28 (implies a potential upside of 35.36%). TTM Diluted EPS at $4.89, MRQ Book Value Per Share at $28.82, Graham number at $56.31 (vs. current price at $47.28, implies a potential upside of 19.10%). The stock has lost 18.92% over the last year.

20. Lakeland Financial Corp. (NASDAQ:LKFN):
Operates as the holding company for Lake City Bank that provides various commercial and retail banking, wealth advisory, and investment management services in Indiana. Market cap of $338.46M. Dividend yield at 2.98%, payout ratio at 31.31%. Target price at $27.25 vs. current price at $20.88 (implies a potential upside of 30.51%). TTM Diluted EPS at $1.62, MRQ Book Value Per Share at $16.07, Graham number at $24.20 (vs. current price at $20.88, implies a potential upside of 15.91%). The stock has gained 11.84% over the last year.

*Target price data sourced from Screener.co, BVPS and EPS 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: 20 Dividend Stocks Undervalued By Target Price And Graham