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Analysts like to follow potential takeover/leveraged buyout (LBO) targets because when a company announces that it is being taken over, its stock price often jumps to reflect the takeover premium being paid for the company – a big benefit to shareholders.

One consideration in takeovers is market value – whether the target company is currently undervalued or overvalued by the market. Companies that are viewed as undervalued are at a “good price,” so to speak, making them attractive takeover targets.

We compiled a list of rumored potential takeover/LBO targets from various sources including The Motley Fool and CNN Money. We screened this universe for stocks with high ratios of levered free cash flow/enterprise value, possibly indicating that the stock is undervalued.

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.

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Do you think these companies are attractive takeover targets? Use this list as a starting point for your own analysis.

List sorted by levered free cash flow/enterprise value.

1. Dell Inc. (DELL): Provides integrated technology solutions in the information technology (IT) industry worldwide. Market cap of $28.31B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 16.68% (levered free cash flow at $3.56B and enterprise value at $21.34B). The stock has had a couple of great days, gaining 6.27% over the last week.

2. IAC/InterActiveCorp. (IACI): Engages in the Internet business in the United States and internationally. Market cap of $3.44B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 15.83% (levered free cash flow at $406.71M and enterprise value at $2.57B). The stock has had a couple of great days, gaining 5.07% over the last week.

3. Best Buy Co. Inc. (BBY): Operates as a retailer of consumer electronics, home office products, entertainment products, appliances and related services primarily in the United States, Europe, Canada and China. Market cap of $9.81B. Takeover/LBO rumor sourced from CNN Money. Levered free cash flow/enterprise value at 15.68% (levered free cash flow at $1.57B and enterprise value at $10.01B). The stock is a short squeeze candidate, with a short float at 11.93% (equivalent to 5.03 days of average volume). The stock has lost 34.83% over the last year.

4. SAIC, Inc. (SAI): Offers scientific, engineering, systems integration and technical services to various branches of the U.S. military and U.S. government. Market cap of $4.11B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 14.44% (levered free cash flow at $645.25M and enterprise value at $4.47B). The stock has lost 23.78% over the last year.

5. EarthLink Inc. (ELNK): Provides communications services to individual and business customers in the United States. Market cap of $672.08M. Takeover/LBO rumor sourced from The Motley Fool. Levered free cash flow/enterprise value at 13.86% (levered free cash flow at $145.49M and enterprise value at $1.05B). The stock has lost 28.08% over the last year.

6. CA Technologies (CA): Designs, develops, markets, delivers, licenses and supports information technology (IT) management software products that operate on a range of hardware platforms and operating systems. Market cap of $10.46B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 13.28% (levered free cash flow at $1.21B and enterprise value at $9.11B). The stock has had a couple of great days, gaining 5.95% over the last week.

7. Finish Line Inc. (FINL): Operates as a mall-based specialty retailer in the United States. Market cap of $1.09B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 12.89% (levered free cash flow at $96.10M and enterprise value at $745.45M). The stock is a short squeeze candidate, with a short float at 12.43% (equivalent to 6.4 days of average volume). The stock has had a couple of great days, gaining 9.73% over the last week.

8. Symantec Corporation (SYMC): Provides security, storage and systems management solutions to secure and manage information. Market cap of $12.05B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 12.58% (levered free cash flow at $1.46B and enterprise value at $11.61B). The stock has lost 4.61% over the last year.

9. Ingram Micro Inc. (IM): Distributes information technology (IT) products and supply chain solutions worldwide. Market cap of $2.76B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 11.48% (levered free cash flow at $241.17M and enterprise value at $2.10B). The stock has lost 0.17% over the last year.

10. Hewlett-Packard Company (HPQ): Offers various products, technologies, software, solutions and services to individual consumers and small- and medium-sized businesses (SMBs), as well as to the government, health and education sectors worldwide. Market cap of $55.54B. Takeover/LBO rumor sourced from Nasdaq. Levered free cash flow/enterprise value at 10.96% (levered free cash flow at $8.26B and enterprise value at $75.36B). The stock has lost 33.52% over the last year.

11. The McGraw-Hill Companies, Inc. (MHP): Provides various information services for financial, educational and business information markets worldwide. Market cap of $12.53B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 10.92% (levered free cash flow at $1.29B and enterprise value at $11.81B). The stock has gained 24.93% over the last year.

12. Oshkosh Corporation (OSK): Designs, manufactures and markets a range of access equipment, specialty vehicles and vehicle bodies worldwide. Market cap of $1.88B. Takeover/LBO rumor sourced from Bloomberg Businessweek. Levered free cash flow/enterprise value at 10.61% (levered free cash flow at $254.59M and enterprise value at $2.40B). This is a risky stock that is significantly more volatile than the overall market (beta = 2.62). The stock has had a couple of great days, gaining 5.61% over the last week.

13. Xerox Corp. (XRX): Engages in the development, manufacture, marketing, service and finance of document equipment, software, solutions and services worldwide. Market cap of $11.30B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 10.28% (levered free cash flow at $1.96B and enterprise value at $19.06B). The stock has had a couple of great days, gaining 6.26% over the last week.

14. Sealed Air Corporation (SEE): Manufactures and sells packaging and performance-based materials and equipment systems worldwide. Market cap of $3.38B. Takeover/LBO rumor sourced from Seeking Alpha. Levered free cash flow/enterprise value at 10.22% (levered free cash flow at $394.65M and enterprise value at $3.86B). The stock has had a couple of great days, gaining 5.57% over the last week.

*Data from 11/29. Levered FCF and EV data sourced from Yahoo! Finance, all other data sourced from Finviz. To access the complete list of takeover targets, click here.

Source: 14 Takeover / LBO Targets Undervalued By Levered Free Cash Flows