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"My momma told me, 'You better shop around.'" -- Smokey Robinson

Shopping around is a foundation of smart investing. Independent research allows investors to go beyond famous stocks and shop lesser-known alternatives. As simple as it sounds, you are better off shopping around than using the media as a filter that selects for familiar or popular stocks.

Spectra Energy Corp. (NYSE:SE) produces natural gas in Canada and the United States. It is the subject of frequent Google searches and is a large cap company that is covered by at least 11 analysts. But its large capitalization and the public interest inspired by SE is not a sufficient basis for making an investment decision?

On the contrary, investment returns are ultimately dictated by financial performance, not popularity. Regardless of public interest, the earnings and future cash flows to equity will determine the value of SE stock. The future financial potential of a stock can be gauged by using metrics to determine how cheaply a stock is priced, its ability to weather hardship, and its growth potential.

As alternatives to TSN, consider the following stocks with strong track records and solid credit scores:

Ticker

10-Year AVG ROE

Altman Z-score

Company

Industry

CATO

16.9%

6.15

Cato Corp.

Apparel Stores

DRI

23.1%

3.32

Darden Restaurants

Restaurants

EBF

11.0%

4.20

Ennis Inc.

Office Supplies

HAS

13.2%

3.87

Hasbro Inc.

Toys & Games

HRB

19.1%

3.14

H&R Block, Inc.

Personal Services

IMKTA

10.5%

2.99

Ingles Markets Inc.

Grocery Stores

PETS

43.8%

20.18

PetMed Express Inc.

Drug Delivery

SYY

32.6%

6.77

Sysco Corp.

Food Wholesale

TESS

9.5%

5.52

TESSCO Technologies

Electronics Wholesale

WSTG

10.3%

5.61

Wayside Technology Group

Computers Wholesale

These alternative stocks are all categorized as "safe," according to the Altman Z-score,* indicating that they are not considered bankruptcy risks. Moreover, the average 10-year return on equity demonstrates that CATO, DRI, EBF, HAS, HRB, IMKTA, PETS, SYY, TESS, and WSTG have a track-record of growing shareholder wealth. It is clear from these two metrics that each of these nine alternatives is a quality stock.

What's more, these stocks are cheaper and have better growth prospects than Spectra Energy:

Ticker

P/E

EPS growth past 5 years

EPS growth next 5 years

Div Yield

CATO

11.38

6.8%

10.0%

3.8%

DRI

13.7

8.8%

12.3%

3.9%

EBF

9.18

1.8%

13.0%

4.6%

HAS

11.37

20.3%

11.4%

3.6%

HRB

12.32

8.6%

10.0%

4.9%

IMKTA

10.05

-1.7%

13.3%

4.1%

PETS

13.24

13.1%

11.4%

4.7%

SYY

14.96

7.8%

6.8%

3.7%

TESS

10.03

19.0%

15.0%

3.8%

WSTG

10.64

10.2%

22.0%

5.5%

SE

16.59

-6.4%

6.7%

3.7%

Based on lower price-to-earnings ratios, these stocks are cheaper than SE at current market prices. Better yet, they have better growth prospects according to past trends and analyst projections. Rather than restrict yourself to concentrated investments in a familiar stock, consider a diversified mix of these ten securities as a more attractive alternative.

Spectra Energy is not the only fish in the sea, and it is not the tastiest either. On the contrary, it is simply a well-known fish in the sea. CATO, DRI, EBF, HAS, HRB, IMKTA, PETS, SYY, TESS, and WSTG are better bets for stock investment on the basis of cheaper valuations and greater earnings growth prospects.

*The Altman Z-Score is a measure of bankruptcy risk that is not based on stock price volatility. This score places companies into three groups: "safe" (Z-score > 2.99), "grey" (Z-score between 2.99 and 1.81), and "distressed" (Z-score < 1.81), and is surprisingly useful for identifying bankruptcy risk in the coming year. This method of segmenting companies uses of fundamental (financial statement) data and market capitalization only, not on price volatility. Beyond credit risk prediction, companies with higher Z-scores have historically outperformed companies with lower Z-scores, in aggregate. One sector has not been accurately modeled: Altman's Z-score has not accurately predicted the bankruptcy risk of financial companies.

"Distressed" was a label coined by researchers, and should not be taken to mean that any company is bankrupt or in default on the basis of this calculation alone. Credit scoring is not fate, only prediction based on relative past performance of companies grouped by key variables. Time will tell.

Disclaimer: This research is not a guarantee. This article uses third-party data and may contain approximations and errors. Please check estimates and data for yourself before investing.This article was written to provide investor information and education, and should not be construed as a guarantee or investment advice. I have no idea what your individual risk, time-horizon, and tax circumstances are: please seek the personal advice of a financial planner.

Source: 10 Stocks To Outshine Popular Spectra Energy