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For ideas on how to find potentially undervalued stocks, here’s a list you may find interesting. One ratio that can compare company valuations is levered free cash flow/enterprise value. The higher the ratio, the more likely the company is undervalued.

Levered free cash flow is the free cash flow after deducting interest payments on outstanding debt. Enterprise value is the sum of the firm’s value from all ownership sources: market cap, outstanding debt, and preferred shares. From this value we subtract cash holdings because, in the event of a takeover, that cash would be used towards the takeover price.

We ran a screen on stocks trading under $5 for those with the highest ratios of levered free cash flow/enterprise value.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six 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 should be trading higher? Use this list as a starting-off point for your own analysis.

List sorted by levered free cash flow/enterprise value.

1. ReneSola Ltd. (NYSE:SOL): Engages in the manufacture and sale of solar wafers and solar power products. Market cap of $177.17M. Price as of market close on Nov. 9 at $2.04. Levered free cash flow/enterprise value at 25.08% (levered free cash flow at $124.51M and enterprise value at $496.42M). This is a risky stock that is significantly more volatile than the overall market (beta = 3.13). The stock is currently stuck in a downtrend, trading 8.79% below its SMA20, 14.08% below its SMA50, and 66.92% below its SMA200. The stock has lost 82.74% over the last year.

2. Excel Maritime Carriers, Ltd. (NYSE:EXM): Provides sea borne dry bulk cargo transportation services worldwide. Market cap of $188.99M. Price as of market close on Nov. 9 at $2.22. Levered free cash flow/enterprise value at 23.24% (levered free cash flow at $281.21M and enterprise value at $1.21B). This is a risky stock that is significantly more volatile than the overall market (beta = 2.85). The stock is a short squeeze candidate, with a short float at 11.1% (equivalent to 9.24 days of average volume). It's been a rough couple of days for the stock, losing 10.84% over the last week.

3. TRC Companies Inc. (NYSE:TRR): Provides consulting, engineering, and construction management services in the United States. Market cap of $101.51M. Price as of market close on Nov. 9 at $3.65. Levered free cash flow/enterprise value at 21.51% (levered free cash flow at $20.97M and enterprise value at $97.49M). It's been a rough couple of days for the stock, losing 8.98% over the last week.

4. Christopher & Banks Corporation (NYSE:CBK): Operates as a retailer of women's apparel in the United States. Market cap of $101.65M. Price as of market close on Nov. 9 at $2.83. Levered free cash flow/enterprise value at 19.17% (levered free cash flow at $7.13M and enterprise value at $29.65M). The stock is currently stuck in a downtrend, trading 9.11% below its SMA20, 22.09% below its SMA50, and 45.93% below its SMA200. It's been a rough couple of days for the stock, losing 12.11% over the last week.

5. RTI Biologics, Inc. (NASDAQ:RTIX): Produces orthopedic and other surgical implants that repair and promote the natural healing of human bone and other human tissues, and improve surgical outcomes. Market cap of $247.12M. Price as of market close on Nov. 9 at $4.48. Levered free cash flow/enterprise value at 18.61% (levered free cash flow at $38.80M and enterprise value at $208.52M). Exhibiting strong upside momentum--currently trading 10.41% above its SMA20, 22.47% above its SMA50, and 45.57% above its SMA200. The stock has had a good month, gaining 29.86%.

6. Dot Hill Systems Corp. (NASDAQ:HILL): Designs, manufactures, and markets a range of software and hardware storage systems for the entry and midrange storage markets worldwide. Market cap of $81.35M. Price as of market close on Nov. 9 at $1.42. Levered free cash flow/enterprise value at 16.83% (levered free cash flow at $5.90M and enterprise value at $35.05M). The stock is currently stuck in a downtrend, trading -14.3% below its SMA20, -12.88% below its SMA50, and -41.54% below its SMA200. It's been a rough couple of days for the stock, losing 12.88% over the last week.

7. New York & Company Inc. (NYSE:NWY): Operates as a specialty retailer of women's fashion apparel and accessories in the United States. Market cap of $161.98M. Price as of market close on Nov. 9 at $2.61. Levered free cash flow/enterprise value at 16.02% (levered free cash flow at $20.80M and enterprise value at $129.81M). This is a risky stock that is significantly more volatile than the overall market (beta = 2.56). The stock is currently stuck in a downtrend, trading 6.27% below its SMA20, 16.37% below its SMA50, and 47.51% below its SMA200. The stock has had a couple of great days, gaining 5.24% over the last week.

8. Reading International Inc. (NASDAQ:RDI): Engages in the development, ownership, and operation of entertainment and real property assets in the United States, Australia, and New Zealand. Market cap of $96.22M. Price as of market close on Nov. 9 at $4.20. Levered free cash flow/enterprise value at 15.55% (levered free cash flow at $45.26M and enterprise value at $291.09M). The stock has lost 20.3% over the last year.

9. Aastrom Biosciences, Inc. (NASDAQ:ASTM): Engages in developing autologous cell therapies for the treatment of severe and chronic cardiovascular diseases. Market cap of $103.91M. Price as of market close on Nov. 9 at $2.69. Levered free cash flow/enterprise value at 14.25% (levered free cash flow at $11.75M and enterprise value at $82.44M). The stock is a short squeeze candidate, with a short float at 7.52% (equivalent to 11.34 days of average volume). The stock has had a good month, gaining 13.98%.

10. Mitel Networks Corp. (NASDAQ:MITL): Provides integrated communications solutions primarily to the SME market in the United States and internationally. Market cap of $129.71M. Price as of market close on Nov. 9 at $2.42. Levered free cash flow/enterprise value at 13.56% (levered free cash flow at $49.64M and enterprise value at $366.13M). Relatively low correlation to the market (beta = 0.), which may be appealing to risk averse investors. It's been a rough couple of days for the stock, losing 11.36% over the last week.

11. China Hydroelectric Corporation (NYSE:CHC): Engages in the acquisition, ownership, development, construction, operation, and financing of hydroelectric power projects in the People's Republic of China. Market cap of $80.45M. Price as of market close on Nov. 9 at $1.49. Levered free cash flow/enterprise value at 13.39% (levered free cash flow at $66.64M and enterprise value at $497.52M). Relatively low correlation to the market (beta = 0.), which may be appealing to risk averse investors. The stock has performed poorly over the last month, losing 14.86%.

12. CryoLife Inc. (NYSE:CRY): Engages in the processing and distribution of implantable living human tissues for use in cardiac and vascular surgeries in the United States and Canada. Market cap of $129.44M. Price as of market close on Nov. 9 at $4.60. Levered free cash flow/enterprise value at 12.52% (levered free cash flow at $13.57M and enterprise value at $108.39M).

Levered FCF and enterprise value data sourced from Yahoo Finance; all other data sourced from Finviz.

Source: 12 Stocks Under $5 Undervalued By Levered Free Cash Flow