15 S&P 500 Stocks Undervalued By Levered Free Cash Flows

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Includes: A, AET, ANTM, CF, DELL, EXPE, GME, GNW, LDOS, LUV, MRO, NFLX, TSO, TWX, UNH
by: Kapitall

Do you consider yourself a value investor? If you're interested in finding potentially undervalued stocks, you may like this list.

We ran a screen on the stocks of the S&P 500 for those with relatively high ratios of levered free cash flow/enterprise value, possibly indicating that they are 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.

The higher the ratio of levered free cash flow/enterprise value, the more likely the company as a whole is being undervalued relative to its cash flows.

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 point for your own analysis.

List sorted by LFCF/EV.

1. WellPoint Inc. (WLP): Operates as a health benefits company in the United States. Market cap of $25.24B. Levered free cash flow/enterprise value at 24.11% (levered free cash flow at $3.79B and enterprise value at $15.72B). The stock has had a couple of great days, gaining 6.75% over the last week.

2. GameStop Corp. (NYSE:GME): Operates as a retailer of video game products and personal computer entertainment software. Market cap of $3.33B. Levered free cash flow/enterprise value at 21.29% (levered free cash flow at $636.65M and enterprise value at $2.99B). The stock is a short squeeze candidate, with a short float at 29.91% (equivalent to 11.68 days of average volume). The stock has gained 20.75% over the last year.

3. Time Warner Inc. (NYSE:TWX): Operates as a media and entertainment company in the United States and internationally. Market cap of $37.39B. Levered free cash flow/enterprise value at 20.52% (levered free cash flow at $10.73B and enterprise value at $52.29B). The stock has gained 14.81% over the last year.

4. CF Industries Holdings, Inc. (NYSE:CF): Manufactures and distributes nitrogen and phosphate fertilizer products, serving agricultural and industrial customers worldwide. Market cap of $10.93B. Levered free cash flow/enterprise value at 20.23% (levered free cash flow at $2.27B and enterprise value at $11.22B). The stock has had a couple of great days, gaining 5.8% over the last week.

5. Southwest Airlines Co. (NYSE:LUV): Operates as a passenger airline that provides scheduled air transportation in the United States. Market cap of $6.91B. Levered free cash flow/enterprise value at 19.92% (levered free cash flow at $1.46B and enterprise value at $7.33B). The stock has lost 31.9% over the last year.

6. Tesoro Corporation (NYSE:TSO): Engages in refining and marketing petroleum products in the United States. Market cap of $3.26B. Levered free cash flow/enterprise value at 19.61% (levered free cash flow at $731.62M and enterprise value at $3.73B). The stock has gained 24.93% over the last year.

7. Aetna Inc. (NYSE:AET): Operates as a diversified health care benefits company in the United States. Market cap of $16.01B. Levered free cash flow/enterprise value at 18.93% (levered free cash flow at $3.12B and enterprise value at $16.48B). Might be undervalued at current levels, with a PEG ratio at 0.78, and P/FCF ratio at 7.25. The stock has gained 36.73% over the last year.

8. Expedia Inc. (NASDAQ:EXPE): Operates as an online travel company in the United States and internationally. Market cap of $8.34B. Levered free cash flow/enterprise value at 18.46% (levered free cash flow at $730.88M and enterprise value at $3.96B). The stock is a short squeeze candidate, with a short float at 18.58% (equivalent to 7.16 days of average volume). The stock has performed poorly over the last month, losing 30.05%.

9. Marathon Oil Corporation (NYSE:MRO): Operates as an international energy company with operations in the United States, Canada, Africa, the Middle East, and Europe. Market cap of $21.52B. Levered free cash flow/enterprise value at 18.40% (levered free cash flow at $4.06B and enterprise value at $22.06B). The stock has gained 29.52% over the last year.

10. Agilent Technologies Inc. (NYSE:A): Provides bio-analytical and electronic measurement solutions to the communications, electronics, life sciences, and chemical analysis industries in the United States and internationally. Market cap of $13.55B. Levered free cash flow/enterprise value at 18.26% (levered free cash flow at $2.24B and enterprise value at $12.27B). The stock has had a couple of great days, gaining 7.54% over the last week.

11. Netflix, Inc. (NASDAQ:NFLX): Provides subscription based Internet services for TV shows and movies in the United States and internationally. Market cap of $5.10B. Levered free cash flow/enterprise value at 17.25% (levered free cash flow at $845.03M and enterprise value at $4.90B). The stock has had a couple of great days, gaining 14.54% over the last week.

12. 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 $4.45B. Levered free cash flow/enterprise value at 17.02% (levered free cash flow at $818.75M and enterprise value at $4.81B). The stock has lost 19.36% over the last year.

13. Dell Inc. (NASDAQ:DELL): Provides integrated technology solutions in the information technology industry worldwide. Market cap of $28.38B. Levered free cash flow/enterprise value at 15.58% (levered free cash flow at $3.56B and enterprise value at $22.85B). The stock has had a couple of great days, gaining 5.19% over the last week.

14. Unitedhealth Group, Inc. (NYSE:UNH): Provides healthcare services in the United States. Market cap of $56.51B. Levered free cash flow/enterprise value at 15.53% (levered free cash flow at $8.02B and enterprise value at $51.64B). The stock has gained 37.44% over the last year.

15. Genworth Financial Inc. (NYSE:GNW): Provides insurance, wealth management, investment, and financial solutions in the United States and internationally. Market cap of $3.83B. Levered free cash flow/enterprise value at 15.33% (levered free cash flow at $1.11B and enterprise value at $7.24B). This is a risky stock that is significantly more volatile than the overall market (beta = 3.05). The stock has had a couple of great days, gaining 15.56% over the last week.

*LFCF/EV 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.