I feel that in order to see substantial gains in the market, one must do substantial research to find stocks that are being sold at a true "value."
When looking for stocks that are "undervalued," there are several facts one can dissect, and even speculation can be used (and often is). Many methods are used to find stocks that are considered undervalued. One popular method is PEG (Price/Earnings to Growth). I like to use this ratio because unlike the P/E, it takes into account growth. Below, I have screened four stocks that I believe to be undervalued given their < 1 PEG. These four stocks' EPS growth rate in the past five years have been >25% and are expected to be >25% for the next five years. Also, these companies have a low long-term debt / equity ratio, further showing how undervalued these companies truly are. Below is my analysis of four undervalued stocks that I feel are poised for a turnaround:
Amtech Systems, Inc. (ASYS) is a global provider of thermal processing systems, including related automation, parts and services for the solar/photovoltaic, semiconductor, silicon wafer and microelectromechanical systems [MEMS] industries. It designs, assembles, sells and installs capital equipment and related consumables used in the manufacture of wafers, primarily for the solar and semi-conductor industries. It sells these products to manufacturers of solar cells, silicon wafers and semi-conductors worldwide, particularly in Asia, United States and Europe. The current market price is $8.40 with a one-year analyst price target of $9.55. This represents a 13.69% upside potential.
Over the past three years, the company has reported four positive (>2%), zero negative, and zero in-line surprises. The average surprise for this time period has been 39.0%. Most recently on 02/09/12, the company reported quarterly earnings of -0.09 per share, a positive surprise of 62.8% above the consensus -0.24. ASYS has a strong balance sheet that leaves it well positioned to ride the current slump in solar equipment spending. Given the strong balance sheet and the solid performance of Amtech's backlog thus far, shows limited downside in the stock at these levels. The five-year EPS growth rate has been 45.85% and is expected to be 35% over the next five years. The company's long-term debt / equity is 0, which is another reason I feel the stock has reached its bottom, and is poised for growth.
POZEN Inc. (POZN) is a pharmaceutical company focused on transforming medicine. The Company has developed Treximet in collaboration with GlaxoSmithKline (GSK). On April 30, 2010, the Food and Drug Association (FDA) approved VIMOVO for the relief of the signs and symptoms of osteoarthritis [OA], rheumatoid arthritis [RA]and ankylosing spondylitis [AS] and to decrease the risk of developing gastric ulcers in patients at risk of developing NSAID-associated gastric ulcers. The current market price is $4.69, with a one-year analyst price target of $4, which I completely disagree with. I would put the target near the mid-five dollar range.
Over the past four quarters, the company has reported three positive (>2%) and one negative(<-2%) surprise earnings. The average surprise for this time period has been 2.4%. POZN's current quarter consensus estimate has increased over the past 90 days from -0.29 to -0.25, a gain of 15.5%. This improvement is significantly greater than its Industry average of -1.0% during the same time period. EPS history over the past five years have been 74.08% and are expected to stay at an average of 30% over the next five years. The company has a very strong balance sheet, given no debt, and a profit margin of 48.51%. This company has an extremely low PEG of 0.11, and I would expect this price to rise substantially.
Atmel Corporation (ATML) is engaged in designing, developing and supply of microcontrollers. The Company offers a portfolio of touch products, which integrate its microcontrollers with touchfocused property. The Company also designs and sells products, which are complementary to is microcontroller business, including nonvolatile memory and flash memory products, radio frequency [RF] and mixed-signal components and application specific integrated circuits [IC]. The current market price is $9.63, with a one-year analyst price target of $12.79. This represents a 32.81% upside potential.
Over the past three years, the company has reported four positive (>2%), one negative (<-2%), and zero in-line surprises. The average surprise for this time period has been 4.3%. Most recently on 02/08/12, the company reported quarterly earnings of 0.07 per share, a negative surprise of -15.7% below the consensus 0.08. Despite the cluster of positive/negative surprises, the company has a five-year EPS growth rate of 61.51% and expects another 27.43% over the next five years. The company's days sales in receivables is at its five-year low and based on its PEG of 0.52, ATML currently trades at a 26% discount to its Semiconductors Industry peers. Atmel has a strong balance sheet with a long-term debt / equity ratio of 0 which is another reason this stock is a must have for value investors.
RTI Biologics, Inc. (RTIX) process human musculoskeletal and other tissue. It also processes bone, cartilage, tendon, ligament, fascia lata, pericardium, sclera and dermal tissue, and bovine animal tissue in producing allograft and xenograft implants utilizing biocleanse and tutoplast sterilization processes, for distribution to hospitals and surgeons. The current market price is $3.65 with a one-year analyst price target of $5.13. This represents a 40.55% upside potential.
Over the past three years, the company has reported three positive (>2%), zero negative, and one in-line (within 2%) surprises. The average surprise for this time period has been 26.0%. Most recently on 01/31/12, the company reported quarterly earnings of 0.04 per share, a positive surprise of 25.0% above the consensus 0.03. For fiscal year 2012, analysts estimate that RTIX will earn $0.16 and for 2013, analysts estimate that RTIX's earnings per share will grow by 37% to $0.22. Over the past five years EPS growth rate has been 35.21% and are expected to be 28.40% over the next five years. RTIX has a long-term debt / equity ratio of 0 and a PEG of 0.87 further making this a great value stock that is poised for growth.
|Index||-||P/E||24.73||EPS||0.15||Insider Own||1.36%||Shs Outstand||55.60M||Perf Week||-0.27%|
|Market Cap||206.28M||Forward P/E||16.86||EPS next Y||0.22||Insider Trans||35.96%||Shs Float||55.02M||Perf Month||-9.07%|
|Income||8.38M||PEG||0.87||EPS next Q||0.03||Inst Own||79.61%||Short Float||3.34%||Perf Quarter||-17.56%|
|Sales||169.32M||P/S||1.22||EPS this Y||106.40%||Inst Trans||5.53%||Short Ratio||6.51||Perf Half Y||17.78%|
|Book/sh||3.10||P/B||1.20||EPS next Y||37.50%||ROA||3.68%||Target Price||5.13||Perf Year||45.49%|
|Cash/sh||0.83||P/C||4.47||EPS next 5Y||28.40%||ROE||5.01%||52W Range||2.54 - 4.79||Perf YTD||-16.44%|
|Dividend||-||P/FCF||10.70||EPS past 5Y||35.21%||ROI||4.33%||52W High||-22.76%||Beta||1.57|
|Dividend %||-||Quick Ratio||2.33||Sales past 5Y||18.01%||Gross Margin||43.45%||52W Low||45.67%||ATR||0.13|
|Employees||706||Current Ratio||4.48||Sales Q/Q||-5.39%||Oper. Margin||6.95%||RSI (14)||41.61||Volatility||3.46% 3.17%|
|Optionable||Yes||Debt/Eq||0.00||EPS Q/Q||-15.58%||Profit Margin||4.95%||Rel Volume||0.95||Prev Close||3.71|
|Shortable||Yes||LT Debt/Eq||0.00||Earnings||Jan 31 BMO||Payout||0.00%||Avg Volume||281.75K||Price||3.70|
|Index||-||P/E||14.36||EPS||0.67||Insider Own||2.35%||Shs Outstand||450.94M||Perf Week||-4.66%|
|Market Cap||4.34B||Forward P/E||14.58||EPS next Y||0.66||Insider Trans||5.79%||Shs Float||440.65M||Perf Month||-2.43%|
|Income||314.99M||PEG||0.52||EPS next Q||0.04||Inst Own||83.59%||Short Float||4.17%||Perf Quarter||12.12%|
|Sales||1.80B||P/S||2.41||EPS this Y||-24.44%||Inst Trans||-1.37%||Short Ratio||2.36||Perf Half Y||2.01%|
|Book/sh||2.44||P/B||3.94||EPS next Y||46.67%||ROA||19.83%||Target Price||12.35||Perf Year||-17.99%|
|Cash/sh||0.74||P/C||13.05||EPS next 5Y||27.43%||ROE||29.50%||52W Range||7.36 - 15.65||Perf YTD||18.77%|
|Dividend||-||P/FCF||32.72||EPS past 5Y||61.51%||ROI||26.24%||52W High||-38.21%||Beta||1.16|
|Dividend %||-||Quick Ratio||2.00||Sales past 5Y||1.53%||Gross Margin||50.37%||52W Low||31.39%||ATR||0.37|
|Employees||5200||Current Ratio||3.14||Sales Q/Q||-16.21%||Oper. Margin||21.19%||RSI (14)||47.03||Volatility||3.30% 3.64%|
|Optionable||Yes||Debt/Eq||0.00||EPS Q/Q||-84.79%||Profit Margin||17.47%||Rel Volume||0.79||Prev Close||9.62|
|Shortable||Yes||LT Debt/Eq||0.00||Earnings||Feb 08 AMC||Payout||0.00%||Avg Volume||7.80M||Price||9.67|
|Index||-||P/E||3.40||EPS||1.40||Insider Own||1.43%||Shs Outstand||29.92M||Perf Week||9.68%|
|Market Cap||142.42M||Forward P/E||-||EPS next Y||-0.74||Insider Trans||13.23%||Shs Float||26.49M||Perf Month||7.69%|
|Income||42.34M||PEG||0.11||EPS next Q||-0.25||Inst Own||48.73%||Short Float||3.58%||Perf Quarter||19.60%|
|Sales||86.95M||P/S||1.64||EPS this Y||83.21%||Inst Trans||7.60%||Short Ratio||10.26||Perf Half Y||69.40%|
|Book/sh||3.52||P/B||1.35||EPS next Y||21.30%||ROA||44.28%||Target Price||4.00||Perf Year||3.48%|
|Cash/sh||4.00||P/C||1.19||EPS next 5Y||30.00%||ROE||50.97%||52W Range||2.15 - 6.39||Perf YTD||20.51%|
|Dividend||-||P/FCF||-||EPS past 5Y||74.08%||ROI||50.59%||52W High||-26.45%||Beta||1.36|
|Dividend %||-||Quick Ratio||-||Sales past 5Y||45.10%||Gross Margin||-||52W Low||118.60%||ATR||0.19|
|Employees||29||Current Ratio||7.56||Sales Q/Q||151.39%||Oper. Margin||48.51%||RSI (14)||59.05||Volatility||4.26% 4.64%|
|Optionable||Yes||Debt/Eq||0.00||EPS Q/Q||235.01%||Profit Margin||48.69%||Rel Volume||0.30||Prev Close||4.76|
|Shortable||Yes||LT Debt/Eq||0.00||Earnings||Feb 28 BMO||Payout||-||Avg Volume||92.29K||Price||4.70|
|Index||-||P/E||4.87||EPS||1.73||Insider Own||2.18%||Shs Outstand||9.48M||Perf Week||5.38%|
|Market Cap||79.82M||Forward P/E||13.16||EPS next Y||0.64||Insider Trans||31.92%||Shs Float||8.92M||Perf Month||-6.03%|
|Income||17.02M||PEG||0.14||EPS next Q||-0.22||Inst Own||46.45%||Short Float||8.50%||Perf Quarter||0.00%|
|Sales||217.72M||P/S||0.37||EPS this Y||126.36%||Inst Trans||-4.96%||Short Ratio||4.82||Perf Half Y||-22.96%|
|Book/sh||11.83||P/B||0.71||EPS next Y||277.80%||ROA||9.27%||Target Price||9.55||Perf Year||-61.95%|
|Cash/sh||5.80||P/C||1.45||EPS next 5Y||35.00%||ROE||16.82%||52W Range||7.12 - 26.03||Perf YTD||-1.06%|
|Dividend||-||P/FCF||9.30||EPS past 5Y||45.85%||ROI||15.24%||52W High||-67.20%||Beta||1.85|
|Dividend %||-||Quick Ratio||1.86||Sales past 5Y||43.57%||Gross Margin||35.95%||52W Low||19.93%||ATR||0.50|
|Employees||420||Current Ratio||2.47||Sales Q/Q||-53.96%||Oper. Margin||12.90%||RSI (14)||44.25||Volatility||4.86% 5.02%|
|Optionable||Yes||Debt/Eq||0.00||EPS Q/Q||-117.85%||Profit Margin||7.21%||Rel Volume||0.55||Prev Close||8.42|
|Shortable||Yes||LT Debt/Eq||0.00||Earnings||Feb 09||Payout||0.00%||Avg Volume||157.34K||Price||8.54|