Do you like to be able to rely on a stock's dividend income? Looking for undervalued stocks? Do you prefer companies with strong profits? For ideas on how to go about your analysis, here is a list you might be interested in.
The PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share [EPS], and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive) - a PEG ratio of 1 means the company is fairly priced.
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 Operating Profit Margin is a profitability ratio that measures the effectiveness of the company's operating efficiency. This metric allows investors to see how much profit is left after all variable costs are covered. If the company's margin is increasing over time this means that it's earning more per dollar of sales. Finding trends in the Operating Profit Margin helps investors identify companies that are improving profitability over time and managing the economic landscape better than competitors.
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
We first looked for dividend stocks. From here, we then looked for companies that appear undervalued to earnings growth (PEG < 1)(forward P/E<10). We then looked for companies with strong profit margins (1-year operating margin>15%)(Net Margin [TTM]>10%). We did not screen out any market caps or sectors.
Do you think these stocks are undervalued and should be trading higher? Use this list as a starting-off point for your own analysis.
1) Apollo Commercial Real Estate Finance, Inc. (ARI)
| Sector: | Financial |
| Industry: | REIT - Diversified |
| Market Cap: | $328.55M |
| Beta: | - |
Apollo Commercial Real Estate Finance, Inc. has a Dividend yield of 10.01% and Price/Earnings to Growth Ratio of 0.97 and Forward Price/Equity Ratio of 9.08 and Operating Profit Margin of 53.07% and Net Margin of 48.91%. The short interest was 3.89% as of 05/02/2012. Apollo Commercial Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States. It originates, acquires, invests in, and manages performing commercial first mortgage loans, commercial mortgage-backed securities, mezzanine financings, and other commercial real estate-related debt investments. The company is qualified as a real estate investment trust (REIT) under the Internal Revenue Code.
2) The Bank of New York Mellon Corporation (BK)
| Sector: | Financial |
| Industry: | Asset Management |
| Market Cap: | $28.54B |
| Beta: | 0.86 |
The Bank of New York Mellon Corporation has a Dividend yield of 2.17% and Price/Earnings to Growth Ratio of 0.94 and Forward Price/Equity Ratio of 9.53 and Operating Profit Margin of 24.12% and Net Margin of 17.18%. The short interest was 1.27% as of 05/02/2012. The Bank of New York Mellon Corporation, a financial services company, provides various products and services worldwide. The company offers a range of equity, fixed income, cash, and alternative/overlay products, as well as distributes investment management products. It also provides investment management, wealth and estate planning, and private banking solutions to high-net-worth individuals and families, charitable gift programs, endowments and foundations, and related entities, as well as offers mutual funds, separate accounts, and annuities.
3) Capital One Financial Corp. (COF)
| Sector: | Financial |
| Industry: | Credit Services |
| Market Cap: | $25.60B |
| Beta: | 1.76 |
Capital One Financial Corp. has a Dividend yield of 0.36%, Price/Earnings to Growth Ratio of 0.79, Forward Price/Equity Ratio of 8.12, Operating Profit Margin of 29.53% and Net Margin of 21.75%. The short interest was 1.43% as of 05/02/2012. Capital One Financial Corporation operates as the bank holding company for the Capital One Bank (USA), National Association (COBNA), and Capital One, National Association (CONA), which provide various financial products and services in the United States, the United Kingdom, and Canada. It offers consumer and small business credit card lending, national closed end installment lending, and the international credit card lending services.
The company also provides various non-interest bearing and interest-bearing deposits, including demand deposits, money market deposits, negotiable order of withdrawal accounts, savings accounts, certificates of deposit, and other consumer time deposits. Its loan portfolio comprises credit card loans; consumer loans, such as auto, home, and retail banking loans; and commercial loans, including commercial and multifamily real estate, middle market, specialty lending, and small-ticket commercial real estate loans.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
