Interested in financial companies? Looking for ways to dig deeper into a company's profitability? Looking for undervalued stocks? We ran a screen you might find helpful.
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.
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.
We first looked for financial stocks. We next screened for businesses that have strong profitability (1-year fiscal EPS Growth Rate>10%)(Net Margin [TTM]>10%). We then looked for businesses that are trading at a discount (P/E<10)(forward P/E<10). We did not screen out any market caps.
Do you think these stocks deserve to grow higher? Use our screened list as a starting point for your own analysis.
1) Capstead Mortgage Corp. (NYSE:CMO)
|Industry:||REIT - Diversified|
Capstead Mortgage Corp. has a Earnings Per Share Growth Rate of 15.07% and Net Margin of 66.67% and Price/Earnings Ratio of 7.50 and Forward Price/Earnings Ratio of 7.63. The short interest was 4.36% as of 05/20/2012. Capstead Mortgage Corporation operates as a self-managed real estate investment trust. It invests in leveraged portfolio of residential mortgage pass-through securities consisting of adjustable-rate mortgage securities issued and guaranteed by government-sponsored enterprises or by an agency of the federal government. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders.
2) Discover Financial Services (NYSE:DFS)
Discover Financial Services has a Earnings Per Share Growth Rate of 233.36% and Net Margin of 33.35% and Price/Earnings Ratio of 7.18 and Forward Price/Earnings Ratio of 8.19. The short interest was 0.81% as of 05/20/2012. Discover Financial Services, a bank holding company, offers direct banking and payment services in the United States. It operates in two segments, Direct Banking and Payment Services. The Direct Banking segment offers Discover card-branded credit cards to individuals and small businesses that are accepted on the Discover Network.
3) The Carlyle Group LP (NASDAQ:CG)
The Carlyle Group LP has a Earnings Per Share Growth Rate of 10.31% and Net Margin of 20.44% and Price/Earnings Ratio of 4.39 and Forward Price/Earnings Ratio of 3.74. The short interest was 8.94% as of 05/20/2012. The Carlyle Group is an investment firm specializing in direct and fund of fund investments. Within direct investments, it specializes in management-led buyouts, divestitures, strategic minority equity investments, equity private placements, consolidations and buildups, leveraged finance, and venture and growth capital financings. The firm typically invests in agriculture, aerospace, defense, automotive, consumer, retail, industrial, infrastructure, energy, power, healthcare, software, technology, real estate, financial services, transportation, business services, telecommunications, and media sectors.
4) Apollo Global Management, LLC (NYSE:APO)
Apollo Global Management, LLC has a Earnings Per Share Growth Rate of 151.23% and Net Margin of 33.59% and Price/Earnings Ratio of 6.02 and Forward Price/Earnings Ratio of 3.78. The short interest was 5.51% as of 05/20/2012. 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.
5) Crexus Investment Corp. (NYSE:CXS)
|Industry:||REIT - Diversified|
Crexus Investment Corp. has a Earnings Per Share Growth Rate of 163.94% and Net Margin of 97.05% and Price/Earnings Ratio of 6.52 and Forward Price/Earnings Ratio of 9.19. The short interest was 2.40% as of 05/20/2012. CreXus Investment Corp., through its subsidiaries, operates as a commercial real estate company. It acquires, manages, and finances commercial mortgage loans and commercial real estate debts, commercial real properties, commercial mortgage-backed securities, other commercial real estate-related assets, and agency residential mortgage-backed securities. The company qualifies as a real estate investment trust for federal income tax purposes.
6) CYS Investments (NYSE:CYS)
|Industry:||REIT - Residential|
This company has a Earnings Per Share Growth Rate of 185.99% and Net Margin of 120.08% and Price/Earnings Ratio of 9.72 and Forward Price/Earnings Ratio of 6.49. The short interest was 11.28% as of 05/20/2012.
*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.