Seeking Alpha
Long/short equity, deep value, value
Profile| Send Message|
( followers)  

The Forward Price/Earning ratio is a valuation metric used by a variety of investors. The primary difference between this and the more standard P/E ratio is that it uses forecasted earnings when being calculated. While these are ultimately just estimates, they still help to provide investors with a better understanding of the firm overall. For example, this metric provides investors with a picture of what the investment community as a whole is expecting to see from a firm moving forward. If earnings are expected to grow moving ahead, then the forward P/E ratio should be less than the current P/E ratio.

Return on Equity is a profitability metric that specifically takes a look from the perspective of shareholders. This ratio can be found by converting net income into a percentage of shareholder equity. In a nutshell ROE (TTM) gauges a firm’s profitability relative to how much earnings have been generated with shareholder money. This is by far one of the most direct profitability ratios when looking to understand the rate of return relative to invested shareholder equity.

We first screened for industrial firms that have a low forward P/E ratio (X<10). From this narrowed pool we looked for firms that have posted strong profitability through Return on Equity over the last twelve trailing months (X>20%). We did not screen out any firms by market capitalization.

The companies are listed from highest to lowest by the Forward P/E ratio:

1. Knoll, Inc. (NYSE:KNL)

Sector

Industrials

Industry

Business Equipment

Market Cap

$714M

Beta

0.99

The firm designs and sells branded office furniture and textiles. The company’s Forward P/E is 9.83. KNL has a ROE (TTM) of 31.11%. The short interest was 6.00% as of 09/30/2011.

2. Deere & Co. (NYSE:DE)

Sector

Industrials

Industry

Farm & Construction Equipment

Market Cap

$28,797M

Beta

1.54

The firm operates 4 business segments, which are agricultural equipment, construction and forestry segment, commercial and consumer equipment segment, and credit segment. The company’s Forward P/E is 9.71. DE has a ROE (TTM) of 37.93%. The short interest was 2.50% as of 09/30/2011.

3. Belden, Inc. (NYSE:BDC)

Sector

Industrials

Industry

Diversified Industrials

Market Cap

$1,333M

Beta

2.06

The firm designs and sells a variety of electronic based components along with specialty electronics items. The company’s Forward P/E is 9.63. BDC has a ROE (TTM) of 21.16%. The short interest was 6.60% as of 09/30/2011.

4. Parker Hannifin Corporation. (NYSE:PH)

Sector

Industrials

Industry

Diversified Industrials

Market Cap

$11,274M

Beta

1.33

The firm builds motion control technologies and systems for a variety of different industries. The company’s Forward P/E is 9.28. PH has a ROE (TTM) of 21.52%. The short interest was 2.00% as of 09/30/2011.

5. Caterpillar Inc. (NYSE:CAT)

Sector

Industrials

Industry

Farm & Construction Equipment

Market Cap

$52,667M

Beta

1.97

The firm makes mining equipment, industrial gas turbines, and a variety of other industrial equipment. The company’s Forward P/E is 9.22. CAT has a ROE (TTM) of 35.44%. The short interest was 3.20% as of 09/30/2011.

6. Cummins, Inc. (NYSE:CMI)

Sector

Industrials

Industry

Diversified Industrials

Market Cap

$17,985M

Beta

1.88

The firm designs, sells, and services diesel and natural gas engines, electric power generation systems, and much more. The company’s Forward P/E is 9.07. CMI has a ROE (TTM) of 33.03%. The short interest was 3.10% as of 09/30/2011.

7. Oshkosh Corporation. (NYSE:OSK)

Sector

Industrials

Industry

Truck Manufacturing

Market Cap

$1,669M

Beta

2.63

The firm designs and builds specialty vehicle bodies and vehicles. The company’s Forward P/E is 9.06. OSK has a ROE (TTM) of 25.26%. The short interest was N/A as of 09/30/2011.

8.SAIC, Inc. (SAI)

Sector

Industrials

Industry

Aerospace & Defense

Market Cap

$4,222M

Beta

0.36

The firm offers scientific, engineering, and other complex services to the U.S. military. The company’s Forward P/E is 8.90. SAI has a ROE (TTM) of 26.03%. The short interest was 3.30% as of 09/30/2011.

9. TriMas Corporation. (NASDAQ:TRS)

Sector

Industrials

Industry

Diversified Industrials

Market Cap

$569M

Beta

2.41

The firm designs engineered products in a diverse range of field applications. The company’s Forward P/E is 8.81. TRS has a ROE (TTM) of 40.13%. The short interest was 6.30% as of 09/30/2011.

10. Lockheed Martin Corporation. (NYSE:LMT)

Sector

Industrials

Industry

Aerospace & Defense

Market Cap

$25,078M

Beta

1.01

The firm designs, manufactures, and services a variety of advanced technology systems along with products. The company’s Forward P/E is 8.65. LMT has a ROE (TTM) of 80.92%. The short interest was 7.80% as of 09/30/2011.

We hope this list helps as investors do their own due diligence on industrial firms with low forward P/E ratios and operate with a strong ROE (TTM). Lastly, these were the top ten firms listed at the time when this article was written.

Source: 10 Undervalued Industrial Stocks That Deserve More Than A Glance