Interested in services companies? Looking for undervalued stocks? Do you prefer companies with strong profits? If so, here's a list you might be interested in.
The Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. As well, it lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue very few can make very large profits with little investment.
We first looked for Services stocks that are undervalued (P/BV<1) and with strong profitability (ROA > 10%). We did not screen out any market caps.
Do you think these services stocks have strong operations? Use this list as a starting-off point for your own analysis.
1) Safeguard Scientifics, Inc. (SFE)
Safeguard Scientifics, Inc. has a Price/Book Value Ratio of 0.97 and Return on Assets of 29.76%. The short interest was 7.84% as of 04/25/2012. Safeguard Scientifics, Inc. is a private equity and venture capital firm specializing in expansion financings, growth capital, management buyouts, re-capitalizations, industry consolidations, corporate spinouts, growth stage, and early stage financings. The firm prefers to make investments in companies engaged in the technology and life sciences sectors. Within the technology sector, it invests in software as a service, technology enabled services, internet/new media, financial services information technology, healthcare information technology and selected business services with capital requirements of up to $25 million.
2) Insignia Systems Inc. (ISIG)
Insignia Systems Inc. has a Price/Book Value Ratio of 0.88 and Return on Assets of 172.61%. The short interest was 0.29% as of 04/25/2012. Insignia Systems, Inc. markets in-store advertising products, programs, and services to consumer packaged goods manufacturers and retailers in the United States and internationally. The company focuses on providing in-store services through the Insignia Point-Of-Purchase Services (POPS) in-store advertising program. Its Insignia POPSign program is a national account-specific in-store shelf-edge advertising program, which allows manufacturers to deliver vital product information to consumers at the point-of-purchase together with each retailer's store-specific prices.
3) Casual Male Retail Group, Inc. (CMRG)
Casual Male Retail Group, Inc. has a Price/Book Value Ratio of 0.98 and Return on Assets of 20.49%. The short interest was 3.28% as of 04/25/2012. Casual Male Retail Group, Inc., together with its subsidiaries, operates as a specialty retailer of big and tall men's apparel in the United States, Canada, and Europe. The company operates its stores under the Casual MaleXL, Casual MaleXL Outlets, DestinationXL, Rochester Clothing, B&T Factory Direct, ShoesXL, and LivingXL names. Its stores offer sportswear, dress clothing, footwear, suits, loungewear, neckwear, and accessories; basic items, including jeans, casual slacks, tee-shirts, polo shirts, dress shirts, and suit separates; and lifestyle products, such as chairs, outdoor accessories, travel accessories, bed and bath products, and fitness equipment, as well as a line of its private label collections, such as Harbor Bay, Gold Series, Synrgy, Oak Hill, and True Nation.
4) PowerSecure International, Inc. (POWR)
PowerSecure International, Inc. has a Price/Book Value Ratio of 0.84 and Return on Assets of 13.23%. The short interest was 5.92% as of 04/25/2012. PowerSecure International, Inc. provides various products and services to electric utilities and to their commercial, institutional, and industrial customers in the United States. The company offers Interactive Distributed Generation power systems, smart grid monitoring for electric utilities, peak shaving and demand response, and standby power dispatch and control solutions; and switchgear products and systems under the NexGear brand name. It also provides utility infrastructure products and services, including transmission and distribution system construction and maintenance under the UtilityServices brand name; engineering, regulatory consulting, and electric grid system design services under the UtilityEngineering and PowerServices brand names.
*Company profiles were sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.