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I hate being late to the party. The recent stock market has rallied, which is bad news for buyers of stocks who now face higher prices and often higher valuations. Have prudent investors seeking attractive valuations been left high and dry? No-- fortunately not all stocks have rallied, leaving many quality companies with attractive valuations.

Finding Quality Value Stocks Which the Rally Left Behind

Consider the following stocks which are down over the past 12 months and trade at attractive valuations:

Ticker

Company

Performance (Year)

P/E

P/S

P/B

AEO

American Eagle Outfitters

-7.4%

14.91

0.9

1.98

ARLP

Alliance Resource Partners

-4.9%

8.71

1.42

4.18

BGFV

Big 5 Sporting Goods Corp.

-14.9%

12.33

0.22

1.23

CMC

Commercial Metals Co.

-0.6%

0

0.19

1.33

CSH

Cash America International

-0.4%

10.95

0.88

1.5

DV

DeVry, Inc.

-3.8%

11.01

1.14

1.82

GME

GameStop Corp.

-5.2%

8.33

0.32

1.06

GPI

Group 1 Automotive Inc.

-1.1%

14.76

0.19

1.44

HGG

hhgregg, Inc.

-17.4%

10.85

0.19

1.41

INTL

INTL FCStone Inc.

-0.6%

13.86

0.01

1.49

KR

The Kroger Co.

-2.3%

12.13

0.15

2.74

MGLN

Magellan Health Services

-1.4%

11.99

0.49

1.58

NAFC

Nash Finch Co.

-1.7%

8.44

0.07

0.87

NEU

NewMarket Corp.

-6.7%

12.26

1.15

4.51

PLCE

The Children

-8.6%

14.77

0.71

2

RCII

Rent-A-Center Inc.

-1.8%

13.67

0.74

1.58

Each of these stocks has declined in price over the last 12 months and trades at attractive valuations. In effect, these companies didn't participate in the rally.

Prudent investors should wonder if there is a catch to these stocks-- if these companies are value traps. The quality of these stocks can be assayed by confirming long-term positive equity returns and financial stability that can weather tough economic conditions. Fortunately, these firms have positive average equity returns over past 10 reported fiscal years and have "safe" Altman Z-scores:

Ticker

Industry

10-Year Average ROE

Altman Z-score

AEO

Apparel Stores

19.5%

7.00

ARLP

Industrial Metals & Minerals

55.5%

3.57

BGFV

Sporting Goods Stores

32.8%

3.66

CMC

Steel & Iron

10.8%

3.54

CSH

Credit Services

12.8%

3.69

DV

Education & Training Services

16.4%

5.29

GME

Electronics Stores

13.1%

3.46

GPI

Auto Dealerships

9.2%

3.88

HGG

Electronics Stores

48.8%

4.83

INTL

Asset Management

11.2%

28.89

KR

Grocery Stores

18.4%

4.89

MGLN

Health Care Plans

20.7%

5.39

NAFC

Food Wholesale

8.5%

5.60

NEU

Specialty Chemicals

12.0%

6.12

PLCE

Apparel Stores

12.0%

6.25

RCII

Rental & Leasing Services

15.9%

3.39

The strong credit metrics and long-term histories of growing shareholder wealth are indicators of quality, and suggest that these firms are not value traps.

Conclusion

Each of these 16 stocks is attractively priced, has quality attributes, and was missed by the recent stock rally. Value investors ought to consider these stocks as buy candidates, and might consider adding multiple names from this list since they hail from a diverse array of industries. Value investors still have much work to do: this is no time to hibernate with the bears.

*Please read the article disclaimer for this article and Altman z-score calculations.

Source: Finding Quality Value Stocks That Missed The Rally