5 Potential Value Plays: Super Profitable, Cash Generating And Unloved By Wall Street

by: Furbonacci

The best returns in the market are often found in the places no one wants to look. This value screen has uncovered 5 potential value plays for your investing pleasure.

Here are the elements of the screen and why they are important:

Forward Price/Earnings multiple under 10 - This number alone can mean many different things. A low multiple can be a warning sign that a company is in trouble or it could mean the company is being undervalued.

Price/Free Cash Flow under 10 - This number can tell us if this business is generating enough cash to sustain itself and if low enough may signal an ability to grow the business with ease or return value to shareholders with a dividend or share repurchase.

Debt/Equity ratio under 10% - This ratio alone can tell us if the company has gone into debt to run or grow its business. Companies who have been operating with very little debt provide an opportunity to the investor because they can raise capital in a favorable debt market to obtain capital to grow the business or return value to shareholders with a buyback.

Return on Equity above 30% - This number alone shows how profitable the company has been with current shareholders investments. This number can be "gamed" by adding debt to the balance sheet but can be a useful measure of profitability if used to gauge performance with ratios above.

Float Short - This number tells us how many of the shares outstanding are being shorted in the market. If your analysis is correct and there are many people short, there is an opportunity for a "short squeeze" once the market beings to recognize the value you see in that particular security.

Filtering for all of these factors yields 5 results, in order by return on equity.

#1 GT Advanced Technologies Inc. (GTAT)

ROE - 80.58%

Forward P/E - 4.8

Price / FCF - 6.37

Debt / Equity - 0

Float Short - 15.58%

#2 Bridgepoint Education Inc. (BPI)

ROE - 58.38%

Forward P/E - 8.29

Price / FCF - 6.55

Debt / Equity - 0

Float Short - 17.44%

#3 Spirit Airlines Inc. (SAVE)

ROE - 42.28%

Forward P/E - 8.47

Price / FCF - 9.65

Debt / Equity - 0

Float Short - 2.51%

#4 USANA Health Sciences Inc. (USNA)

ROE - 31.65%

Forward P/E - 9.56

Price / FCF - 9.25

Debt / Equity - 0

Float Short - 36.73%

#5 Majesco Entertainment Co. (COOL)

ROE - 30.93%

Forward P/E - 6.53

Price / FCF - 8.48

Debt / Equity - 0

Float Short - 5.68%

This is a great starting point in your search for your next value oriented investment. Often in value investing patience is required for the market to recognize the value you have found.

Disclosure: I am long GTAT.