Today, I am going to analyze four very attractive stocks to consider as a buy in this delicate economic environment. A few have always to been lucrative companies while others have become very attractive due to market volatility:
Apple Inc. (AAPL) – AAPL's stock price has been in an upward trend since 2009. Now, the stock is being traded around $382. Also, the stock has traded in a 52-week range between $265.52 and $404.50.
Apple's return on invested capital (ROIC) is more than 200% versus its WACC of around 8%. This means that Apple is a great allocator of capital. The profit margin of the company is 23.53%. AAPL stock has price-to-earnings ratio of 15.12 and a forward price-to-earnings ratio of 11.84. Again, price-earnings-to-growth ratio is 0.64, demonstrating a lower value than it should be. Shares could maintain a PEG closer to 1.
Further analysis of price-to-earnings ratio and price-earnings-to-growth ratio is possible to demonstrate the stock is even cheaper than meets the eye. Subtracting cash and marketable securities per share from its price, the stock is more attractive at an adjusted price-to-earnings ratio and price-earnings-to-growth ratio around 9.0 and 0.41, respectively.
However, it’s clear that AAPL stock is cheaper than Google (GOOG) stock. Also, price-to-sales ratio is lower and stronger than Google's stock at 3.51. Its earnings-per-share is $25.28 currently compared with Google's at $27.72. I strongly recommend AAPL stock as a buy and hold, especially for long-term investors such as retirees.
Autodesk, Inc. (ADSK) – ADSK stock price has moved upward a bit after an August rout and now it is traded around $28. It has traded in a 52-week range between $22.99 and $46.15. Also, the stock has a market capitalization of $6.67 billion.
As the price of ADSK stock started to fall sharply since the second week of May, some investors said that the company will collapse. But the real scenario is a bit different. Although the price saw declines despite a better-than-expected earnings report on August 18, the stock is now regaining its value.
ADSK stock’s price-to-earnings ratio is 27.21 currently, and its forwarded price-to-earnings ratio is 14.85, meaning there's an opportunity for multiple expansion for the stock. Earnings-per-share for the stock is $1.08. Again, ADSK stock’s price-earnings-to-growth ratio at 1.19 versus Adobe's (ADBE) 0.89 may not seem significant, yet its financial reports in the recent year show that it is among the fastest growing of software operations. Currently, quarterly revenue growth for Autodesk is 15.50%. Additionally, its profit margin and return on equity are 12.30% and 15.43%, respectively. As a rational investor, I rate this stock a buy.
F5 Networks, Inc. (FFIV) – FFIV stock is traded around $85 now. The stock has traded in a 52-week range between $69.01 and $145.76.
F5 Networks generated a profit margin and return on equity of 20.34% and 21.08%, respectively. F5 Networks does not pay any dividend for now. Although the price-to-earnings ratio of the stock at 31.09 looks very high when compared with Cisco's (CSCO) 14.25, analyzed more accurately, FFIV stock’s price-earnings-to-growth ratio at 0.92 demonstrates relative value when compared with CSCO stock’s ratio of 1.01. The company's price-earnings-to-growth ratio is a more relevant metric when concluding that this is an attractive stock. I rate it a buy.
Travelzoo Inc. (TZOO) – Recent news from Google that it has come up with a search tool for shopping for flight tickets online is bad news for travel operators like Travelzoo, Expedia (EXPE) and Priceline (PCLN). Expedia and Priceline are key competitors to Travelzoo. A launch of Google’s recent flight search application is expected to negatively affect market shares of other online travel services.
TZOO stock’s forward price-to-earnings ratio is 17.8. Its earnings-per-share is a bit negative at -0.10. The stock shows a price-earnings-to-growth ratio of 1.14 now, and that is similar to the industry average. The company's profit margin and return on equity, however, are negative. Yet the stock is performing very well.
The total market capitalization of Travelzoo is $533.34 million. The stock has been traded in a 52-week range of $23.75 to $103.80. Shares of TZOO stock hit a low of $32.40 last week, which is near the low for the year. On a relative value basis, however, TZOO remains a solid buy.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.