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One way to search for potentially undervalued stocks is by comparing current price to analyst target prices.

Of course, analyst prices tend to be inflated most of the time, so we ran a screen that used the most pessimistic analyst target price as the benchmark for our analysis.

In addition, we only focused on companies that have more than 5 analyst target prices (to make sure we only focus on companies that have decent analyst coverage).

We screened stocks seeing rapid dividend growth year-over-year for those trading at significant discounts to even the most pessimistic analyst target prices, suggesting that these stocks may be undervalued.

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 to enlarge



Do you think these stocks should be trading higher? Use this list as a starting-off point for your own analysis.

List sorted by dividend yield.

1. First Commonwealth Financial Corp. (NYSE:FCF): Operates as the holding company for First Commonwealth Bank that provides consumer and commercial banking services to individuals and small and mid-sized businesses in central and western Pennsylvania. Market cap of $435.38M. Dividend yield at 2.90%, payout ratio at 23.20%. Current year dividend per share estimate at $0.12 vs. TTM dividend per share at $0.08. Of the 7 analysts that have set a target price on the stock, the lowest price target stands at $5.25. This implies a current upside of 32.91% from current levels around $3.95. The stock is a short squeeze candidate, with a short float at 7.28% (equivalent to 8.56 days of average volume). The stock has had a couple of great days, gaining 12.16% over the last week.

2. Newell Rubbermaid Inc. (NYSE:NWL):
Designs, manufactures, sources, packages, and distributes consumer and commercial products. Market cap of $3.73B. Dividend yield at 2.51%, payout ratio at 20.49%. Current year dividend per share estimate at $0.28 vs. TTM dividend per share at $0.23. Of the 12 analysts that have set a target price on the stock, the lowest price target stands at $16.00. This implies a current upside of 27.69% from current levels around $12.53. The stock has had a couple of great days, gaining 7.03% over the last week.

3. Hartford Financial Services Group Inc. (NYSE:HIG):
Provides insurance and financial services in the United States and internationally. Market cap of $8.22B. Dividend yield at 2.17%, payout ratio at 7.67%. Current year dividend per share estimate at $0.37 vs. TTM dividend per share at $0.30. Of the 12 analysts that have set a target price on the stock, the lowest price target stands at $21.00. This implies a current upside of 17.32% from current levels around $17.90. This is a risky stock that is significantly more volatile than the overall market (beta = 3.06). The stock has had a couple of great days, gaining 8.85% over the last week.

*Dividend per share data sourced from Screener.co, target price sourced from Thomson/First Call (via 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: 3 Stocks With Rapid Dividend Growth Undervalued By Target Price