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The key metrics used to find successful undervalued stocks include Price-to-Earnings (PE) ratio, and sum of Growth and Yield to PE (GY2PE). The assessment of relative changes in PE ratio over the course of time highlights the low and high multiples investors are willing to pay for the current and future earnings of a company. Comparing a company's current P/E ratio with benchmarks such as its historical P/E average and the industry P/E average can help a value investor determine if the stock is cheap, fully valued or overpriced. A company with GY2PE of 1 is considered a fairly valued stock; if the ratio is higher it is considered to be discounted.

An uptrend occurs when a stock makes consecutive higher highs and higher lows, resulting in a price advance, which trends progressively higher over time. Each relative high is above the preceding high, and each relative low is higher than the preceding low. An uptrend continues until this series of higher highs and higher lows is broken.

We identified the following undervalued industrial stocks exhibiting an uptrend. The stocks are trading below the average of yearly low P/E for the last five years with a consistent increase in price over the last five trading days. These securities are pretty undervalued compared with other securities in this sector. The mean PE ratio for the industrial sector in S&P500 (NYSEARCA:SPY) is around 15.

PACCAR (NASDAQ:PCAR): PACCAR Inc, and its subsidiaries design, manufacture and distribute light-duty, medium-duty and heavy-duty trucks and related aftermarket parts primarily in the United States and Europe. PCAR is trading with a return on invested capital (ROIC) of 4.27%. PCAR had average yearly minimum forward earnings multiples of 25.40 and mean yearly average forward earnings multiples of 43.05 over the last five years. With these multiples the company would be valued at $106.47 and $180.42 based on its historical minimal and average FPE estimates. The stock has a sum of growth and yield to PE (GY2PE) of 1.91. PCAR has a short ratio of 4.50. PCAR is currently trading at $40.36, rising 9.58% or $3.53 in the last five trading days.

Caterpillar (NYSE:CAT): Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. The company also is a service provider through Caterpillar Financial Services, Caterpillar Remanufacturing Services, Caterpillar Logistics Services and Progress Rail Services. The stock is trading with a ROIC of 6.78%. The stock had average yearly minimum forward earnings multiples of 10.77 and mean yearly average forward earnings multiples of 17.87 over the last five years. With these multiples the company would be valued at $104.44 and $173.38 based on its historical minimal and average FPE estimates. The company has a GY2PE of 1.68. CAT has a short ratio of 2.10. CAT is currently trading at $95.52, rising 3.54% or $3.23 in the last five trading days.

Cummins (NYSE:CMI): Cummins Inc. designs, manufactures, distributes and services diesel and natural gas engines, electric power generation systems and engine-related component products, including filtration, exhaust after treatment, fuel systems, controls and air handling systems. The stock is trading with a ROIC of 24.29%. The company had average yearly minimum forward earnings multiples of 8.84 and mean yearly average forward earnings multiples of 16.06 over the last five years. With these multiples the company would be valued at $89.05 and $161.86 based on its historical minimal and average FPE estimates. CMI has a GY2PE of 1.84. CMI has a short ratio of 1.70. CMI is currently trading at $94.70, rising 6.32% or $5.63 in the last five trading days.

Stanley Black & Decker (NYSE:SWK): Stanley Black & Decker is a manufacturer of tools and hardware and provider of security products and locks. The company is trading with a ROIC of 2.87%. The company has average yearly minimum forward earnings multiples of 11.22 and mean yearly average forward earnings multiples of 16.37 over the last five years. With these multiples the company would be valued at $67.99 and $99.23 based on its historical minimal and average FPE estimates. SWK has a GY2PE of 1.50. SWK has a short ratio of 2.20. SWK is currently trading at $70.78, rising 3.33% or $2.28 in the last five trading days.

Deere (NYSE:DE): Deere & Company provides products and services primarily for agriculture and forestry worldwide. It makes agricultural products that include tractors, combine harvesters, cotton harvesters, balers, planters/seeders, sprayers, and ATVs. It also manufactures construction and forestry equipment. The company is trading with a ROIC of 7.06%. The stock had average yearly minimum forward earnings multiples of 10.26 and mean yearly average forward earnings multiples of 17.35 over the last five years. With these multiples the company would be valued at $77.07 and $130.33 based on its historical minimal and average FPE estimates. The company has a GY2PE of 1.53. DE has a short ratio of 1.60. DE is currently trading at $81.64, rising 3.75% or $2.95 in the last five trading days.

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

Source: 5 Undervalued Industrial Stocks With Positive Momentum