Are you looking for profitable mid-sized companies that still have room to grow? In search of attractive dividend stocks too? We ran a screen you might be interested in.
The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses forecasted numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number, the more a firm is financing its assets internally through stockholder equity. The higher this metric is, the more the firm is relying on debt to finance its assets.
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.
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
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.
We first looked for mid cap dividend stocks with a low price-multiple premium (forward P/E<10) and that appear undervalued from a price-multiple perspective (P/E<10). From our screened list, we then looked for companies that have been able to retain strong profit margins on the bottom line (Net Margin [TTM]>10%) and that have posted strong earnings growth for shareholders over an extended period of time (1-year fiscal EPS growth rate>10%). We did not screen out any sectors.
Do you think these stocks should be priced higher? Please use our list to assist in your own analysis.
1) KeyCorp (KEY)
|Industry:||Money Center Banks|
KeyCorp has a Dividend yield of 1.47%, Forward Price/Equity Ratio of 9.95, Price/Earnings Ratio of 8.87, Net Margin of 22.22% and Earnings Per Share Growth of 94.72%. The short interest was 0.84% as of 04/27/2012. KeyCorp operates as a holding company for KeyBank National Association that provides various banking services in the United States. The company's Key Community Bank segment offers regional banking services, including deposit and investment products; personal finance services and loans comprising residential mortgages, home equity, and installment loans; deposits, investment and credit products, and business advisory services to small businesses; and financial, estate and retirement planning, and asset management services to high-net-worth clients. This segment also provides commercial banking products and services, such as commercial lending, cash management, equipment leasing, investment and employee benefit programs, succession planning, access to capital markets, and derivatives and foreign exchange to mid size businesses.
2) Cliffs Natural Resources Inc. (CLF)
|Industry:||Steel & Iron|
Cliffs Natural Resources Inc. has a Dividend yield of 3.93%, Forward Price/Equity Ratio of 5.59, Price/Earnings Ratio of 5.43, Net Margin of 26.81% and Earnings Per Share Growth of 54.55%. The short interest was 7.38% as of 04/27/2012. Cliffs Natural Resources Inc., a mining and natural resources company, engages in the production of iron ore pellets, fines and lump ore, and metallurgical coal. It operates five iron ore mines located in Michigan and Minnesota; five metallurgical coal mines located in West Virginia and Alabama; and one thermal coal mine located in West Virginia. The company also operates two iron ore mines in eastern Canada that primarily provide iron ore to steel producers in Asia; and two iron ore mining complexes in Western Australia.
3) Patterson-UTI Energy Inc. (PTEN)
|Industry:||Oil & Gas Drilling & Exploration|
Patterson-UTI Energy Inc. has a Dividend yield of 1.18% and Forward Price/Equity Ratio of 7.54 and Price/Earnings Ratio of 8.23 and Net Margin of 12.58% and Earnings Per Share Growth of 170.10%. The short interest was 5.90% as of 04/27/2012. Patterson-UTI Energy, Inc., through its subsidiaries, provides onshore contract drilling services to oil and natural gas exploration and production companies in the United States and Canada. The company offers pressure pumping services that consist of well stimulation and cementing for completion of new wells and remedial work on existing wells, as well as hydraulic fracturing, nitrogen, cementing, and acid pumping services in Texas and the Appalachian Basin; and contract drilling services primarily in Texas, New Mexico, Oklahoma, Arkansas, Louisiana, Mississippi, Colorado, Utah, Wyoming, Montana, North Dakota, Pennsylvania, West Virginia, Ohio, and western Canada. It also owns and invests in oil and natural gas assets located primarily in Texas and New Mexico.
4) RPC Inc. (RES)
|Industry:||Oil & Gas Equipment & Services|
RPC Inc. has a Dividend yield of 3.14% , Forward Price/Equity Ratio of 8.16, Price/Earnings Ratio of 7.56, Net Margin of 16.38% and Earnings Per Share Growth of 101.57%. The short interest was 22.93% as of 04/27/2012. RPC, Inc. provides a range of oilfield services and equipment primarily to independent oil and gas companies engaged in the exploration, production, and development of oil and gas properties in the United States, Africa, Canada, China, eastern Europe, Latin America, the Middle East, and New Zealand. It operates in two segments, Technical Services and Support Services. The Technical Services segment offers pressure pumping, coiled tubing, snubbing, nitrogen pumping, well control consulting and firefighting, downhole tools, wireline, and fluid pumping services.
*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.