5 Undervalued Companies With Steadily Growing Profits

Includes: AEA, APA, APO, ARLP, AVX
by: ZetaKap

Do you prefer companies with the strongest of profits? Further, are you looking for undervalued stocks? Keeping this idea in mind, we ran a screen you might be interested in.

EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. EPS growth rates help investors identify stocks that are increasing or decreasing in profitability. This profitability metric is generally a key driver in the price of the stock as it directly correlates to the profitability of the company as a whole.

The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue.

The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.

We first looked for that have shown strong bottom line growth over the last year (1-year fiscal EPS growth rate>10%) and with strong profitability (Net Margin [TTM] >10%). From this narrowed list of candidates, we then looked for companies that are trading at a discount (P/E<10). We did not screen out any sectors or market caps.

Do you think these stocks deserve to trade higher? Use our list along with your own analysis.


Sector: Technology
Industry: Diversified Electronics
Market Cap: $2.17B
Beta: 0.96

AVX Corp. has a Earnings Per Share Growth of 70.68% and Net Margin of 14.33% and Price/Earnings Ratio of 9.45. The short interest was 1.24% as of 04/26/2012. AVX Corporation, together with its subsidiaries, manufactures and supplies passive electronic components and interconnect products in the Americas, Europe, and Asia. The company operates through three segments: Passive Components, Kyocera Electronic Devices (KED Resale), and Interconnect. The Passive Components segment offers surface mount and leaded ceramic capacitors, RF thick and thin film components, tantalum capacitors, film capacitors, ceramic and film power capacitors, super capacitors, EMI filters, thick and thin film packages, varistors, thermistors, inductors, and resistive products. The KED Resale segment sells ceramic capacitors, frequency control devices, SAW devices, sensor products, RF modules, actuators, acoustic devices, and connectors produced by Kyocera.

Advance America, Cash Advance Centers Inc. (NYSE:AEA)

Sector: Financial
Industry: Credit Services
Market Cap: $657.93M
Beta: 2.75

Advance America, Cash Advance Centers Inc. has a Earnings Per Share Growth of 87.76% and Net Margin of 10.80% and Price/Earnings Ratio of 9.63. The short interest was 5.34% as of 04/26/2012. Advance America, Cash Advance Centers Inc. provides cash advance services primarily in the United States. The company offers cash advance services comprising cash advances and installment loans to middle-income working individuals; check-cashing services; pre-paid debit cards; and money orders and money transfer, and bill payment services as an agent of a licensed third-party money transmitter. As of December 31, 2011, it operated 2,541 centers in 29 states in the United States, 33 centers in the United Kingdom, and 10 centers in Canada, as well as had 13 limited licensees in the United Kingdom.

Apache Corp. (NYSE:APA)

Sector: Basic Materials
Industry: Independent Oil & Gas
Market Cap: $35.90B
Beta: 1.33

Apache Corp. has a Earnings Per Share Growth of 35.69% and Net Margin of 27.14% and Price/Earnings Ratio of 8.11. The short interest was 1.46% as of 04/26/2012. Apache Corporation, an independent energy company, explores for, develops, and produces natural gas, crude oil, and natural gas liquids. It has exploration and production interests in the Permian, Central, Gulf of Mexico Shelf, Gulf of Mexico Deepwater, and Gulf Coast Onshore in the United States; British Columbia, Alberta, and Saskatchewan provinces in Canada; Egypt; offshore Western Australia in the Carnarvon basin; offshore the United Kingdom in the North Sea; and in the Neuqun, Rio Negro, Tierra del Fuego, and Mendoza provinces of Argentina. The company sells its natural gas to local distribution companies, utilities, end-users, integrated oil companies, and supply aggregators and marketers. As of December 31, 2011, it had total estimated proved reserves of 1,370 million barrels of oil of crude oil, condensate, and NGLs.

Alliance Resource Partners LP (NASDAQ:ARLP)

Sector: Basic Materials
Industry: Industrial Metals & Minerals
Market Cap: $2.29B
Beta: 0.79

Alliance Resource Partners LP has a Earnings Per Share Growth of 21.60% and Net Margin of 21.12% and Price/Earnings Ratio of 7.63. The short interest was 1.19% as of 04/26/2012. Alliance Resource Partners, L.P. engages in the production and marketing of coal primarily to utilities and industrial users in the United States.

Apollo Global Management, LLC (NYSE:APO)

Sector: Financial
Industry: Diversified Investments
Market Cap: $1.61B
Beta: -

Apollo Global Management, LLC has a Earnings Per Share Growth of 151.23% and Net Margin of 33.59% and Price/Earnings Ratio of 7.56. The short interest was 5.90% as of 04/26/2012. Apollo Global Management, LLC is a publicly owned investment manager. The firm primarily provides its services to pension and endowment funds, institutional investors, individual investors, pooled investment vehicles, and corporations. It manages client focused portfolios, hedge funds, real estate funds, and private equity funds for its clients.

Company profiles were sourced from Finviz. Financial data was sourced from Yahoo Finance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.