9 Undervalued Mid Caps With Major Cash Hoards

|
 |  Includes: AVX, DO, JNS, KLAC, MKSI, NVLS-OLD, SWC, VEDL, WLK
by: Follow My Alpha

Business like investing is all about having the patience to wait for the right opportunities, and sometimes that means sitting on cash for a while. Realistically, investors aren't always too keen on this idea, because they want to have company capital being put to work. Still, we understand that doing something just for the sake of taking some type of action can lead to poor decision-making. The point is that these companies have accumulated this of cash through continual diligence, and now that they're selling at a steep discount, this makes them very interesting opportunities.

The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having investment value potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated, so the P/E is only as good as the quality of the earnings.

The Current ratio is a liquidity ratio used to determine a firm’s financial health. The metric illustrates how easily a firm can pay back all its short obligations all at once through current assets should they all come due at once. A firm that has a current ratio of one or less is generally a liquidity red flag. Now this doesn’t mean the firm will go bankrupt, but it also doesn’t bode well for the firm and may indicate that the firm could have an issue paying back upcoming obligations.

We first looked for mid cap stocks trading at a low price-multiple valuation (P/E < 10). From this narrowed list of candidates, we looked for companies that have a lot of cash on hand (Current Ratio > 4). We did not screen out any sectors or market caps.

The list is ranked from highest to lowest by the P/E ratio:

1. Novellus Systems, Inc. (NASDAQ:NVLS-OLD)

Sector

Technology

Industry

Semiconductor Equipment & Materials

Market Cap

$2,406M

Beta

1.20

Click to enlarge

The company develops, sells, and supports equipment used to make integrated circuits. The company has a P/E of 9.70 & a Current ratio of 5.59. The short interest was N/A as of 10/14/2011.

2. KLA-Tencor Corporation. (NASDAQ:KLAC)

Sector

Technology

Industry

TechnologySemiconductor Equipment & Materials

Market Cap

$7,848M

Beta

1.79

Click to enlarge

The company supplies yield & process control management solutions. The company has a P/E of 9.63 and a Current ratio of 4.90. The short interest was 7.50% as of 10/14/2011.

3. MKS Instruments, Inc. (NASDAQ:MKSI)

Sector

Industrials

Industry

Diversified Industrials

Market Cap

$1,398M

Beta

1.34

Click to enlarge

The company offers instruments, components, and more to monitor critical parameters for semiconductor and other spaces. The company has a P/E of 9.37 and a Current ratio of 8.33. The short interest was N/A as of 10/14/2011.

4. Sterlite Industries (SLT)

Sector

Basic Materials

Industry

Industrial Metals & Minerals

Market Cap

$8,672M

Beta

2.26

Click to enlarge

The company is a non-ferrous metals and mining company. The company has a P/E of 9.06 and a Current ratio of 4.35. The short interest was N/A as of 10/14/2011.

5. Stillwater Mining Company. (NYSE:SWC)

Sector

Basic Materials

Industry

Industrial Metals & Minerals

Market Cap

$1,309M

Beta

2.65

Click to enlarge

The company develops refines, and sells palladium, along with palladium-associated metals. The company has a P/E of 9.04 and a Current ratio of 6.17. The short interest was 12.20% as of 10/14/2011.

6. Diamond Offshore Drilling, Inc. (NYSE:DO)

Sector

Energy

Industry

Oil & Gas Drilling

Market Cap

$9,112M

Beta

0.87

Click to enlarge

The company offers contract drilling services around the world. The company has a P/E of 8.97 and a Current ratio of 5.18. The short interest was 15.70% as of 10/14/2011.

7. Westlake Chemical Corporation. (NYSE:WLK)

Sector

Basic Materialas

Industry

Specialty Chemicals

Market Cap

$2,744M

Beta

0.87

Click to enlarge

The company is a vertically integrated maker of basic chemicals, vinyls, polymers and more. The company has a P/E of 8.83 and a Current ratio of 5.12. The short interest was 2.00% as of 10/14/2011.

8. AVX Corporation. (NYSE:AVX)

Sector

Technology

Industry

Electronic Components

Market Cap

$2,281M

Beta

N/A

Click to enlarge

The company manufactures and sells passive electronic components and other products. The company has a P/E of 8.81 and a Current ratio of 6.74. The short interest was N/A as of 10/14/2011.

9. Janus Capital Group, Inc. (NYSE:JNS)

Sector

Financial Services

Industry

Asset Management

Market Cap

$1,224M

Beta

2.96

Click to enlarge

The company offers investment management and other related services to retail and institutional investors. The company has a P/E of 6.95 and a Current ratio of 5.86. The short interest was 3.50% as of 10/14/2011.

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

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.