4 Rallying Stocks Under $5 Undervalued By EPS Trends

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 |  Includes: CAA, MNI, NEI, RTK
by: Kapitall

Do you like searching for low-priced stocks? It's important to remember that some stocks are priced low for a reason, while others simply have low stock prices. For ideas on how to start your search and weed out the value traps, we ran a screen.

We screened stocks trading below $5 a share for those rallying above their 20-day, 50-day, and 200-day moving averages. We then screened these names to find those that appear undervalued relative to EPS trends.

Based on the assumption that P/E is equal to a constant k, it follows that increases in EPS should be matched by proportionate increases in price. When they don't match up, a mispricing may have occurred.

Although there's no reason to expect P/E to stay at a constant, it is merely an assumption for the sake of the screen.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the 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 are value traps, or are they underestimated? Use this list as a starting point for your own analysis.

1. The McClatchy Company (NYSE:MNI): Operates as a newspaper publisher in the United States. The stock is trading 2.18% above its 20-day moving average, 9.43% above its 50-day MA, and 31.51% above its 200-day MA. Current price at $2.70. The EPS estimate for the company's current year increased from 0.41 to 0.47 over the last 30 days, an increase of 14.63%. This increase came during a time when the stock price changed by 13.03% (from 2.38 to 2.69 over the last 30 days).

2. Network Engines, Inc. (NASDAQ:NEI): Provides application platforms and appliance solutions for original equipment manufacturers and independent software vendors worldwide. The stock is trading 6.49% above its 20-day moving average, 20.36% above its 50-day MA, and 23.91% above its 200-day MA. Current price at $1.48. The EPS estimate for the company's current year increased from 0.13 to 0.15 over the last 30 days, an increase of 15.38%. This increase came during a time when the stock price changed by 8.7% (from 1.38 to 1.5 over the last 30 days).

3. Rentech, Inc. (NASDAQ:RTK): Provides alternative and clean energy solutions; and manufactures and sells nitrogen fertilizer products. The stock is trading 5.64% above its 20-day moving average, 18.21% above its 50-day MA, and 56.03% above its 200-day MA. Current price at $1.91. The EPS estimate for the company's current year increased from 0.11 to 0.12 over the last 30 days, an increase of 9.09%. This increase came during a time when the stock price changed by 5.17% (from 1.74 to 1.83 over the last 30 days).

4. Standard Pacific Corp. (SPF): Operates as a diversified builder of single-family attached and detached homes in the United States. The stock is trading 0.68% above its 20-day moving average, 13.51% above its 50-day MA, and 35.00% above its 200-day MA. Current price at $4.34. The EPS estimate for the company's current year increased from 0.12 to 0.15 over the last 30 days, an increase of 25.%. This increase came during a time when the stock price changed by 11.29% (from 3.81 to 4.24 over the last 30 days).

*Earnings 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.