In the search for potentially undervalued stocks, we ran a screen based on the theoretical assumption that if P/E is equal to a constant K, growth in EPS estimates should be matched by proportionate growth in price. When they don’t match up, a mispricing may have occurred.
We ran a screen on large-cap stocks from the tech sector for those exhibiting this mismatch between changes in EPS estimate and price.
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.
Do you think these stocks failed to price in their earnings? Use this list as a starting-off point for your own analysis.
List sorted by market cap.
1. BT Group plc (BT): Provides communications solutions and services worldwide. Market cap of $23.22B. Over the last 30 days, analyst projected EPS has increased 27.14% (from $3.50 to $4.45), while the price has increased 11.79% (from $25.87 to $28.92). The stock has had a good month, gaining 16.27%.
2. Telefonos de Mexico, S.A.B. de C.V. (TMX): Provides telecommunications services primarily in Mexico. Market cap of $13.94B. Over the last 30 days, analyst projected EPS has increased 5.83% (from $1.20 to $1.27), while the price has increased 3.94% (from $14.73 to $15.31). The stock has gained 3.2% over the last year.
3. Crown Castle International Corp. (CCI): Operates, and leases towers and other wireless infrastructure primarily in the United States and Australia. Market cap of $11.67B. Over the last 30 days, analyst projected EPS has increased 2.13% (from $0.47 to $0.48), while the price has increased 0.67% (from $40.30 to $40.57). The stock has lost 5.89% over the last year.
*Projected EPS data and price 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.