Today we focus on mid cap stocks that are trading at a discount, despite their high expected growth in the short and long term. Here are some ideas you might find interesting.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 5-Year Expected EPS Growth Rate is a long term annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
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 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.
We first looked for mid cap stocks. Next, we then screened for businesses that have high future earnings per share growth forecasts(5-year projected EPS Growth Rate>25%). From here, we then looked for companies with a low price-multiple premium (forward P/E<10)(PEG < 1). We did not screen out any sectors.
Do you think these mid-cap stocks should have higher valuations? Please use our list to assist with your own analysis.
1) Oil States International Inc. (OIS)
|Industry:||Oil & Gas Equipment & Services|
Oil States International Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 38.80% and Forward Price/Earnings Ratio of 7.46 and Price/Earnings to Growth Ratio of 0.23. The short interest was 5.13% as of 06/01/2012. Oil States International, Inc., through its subsidiaries, provides specialty products and services to the oil and gas drilling and production companies worldwide. It operates in four segments: Accommodations, Offshore Products, Well Site Services, and Tubular Services. The Accommodations segment offers temporary and permanent work force accommodation services for people working in remote locations.
2) Goodyear Tire & Rubber Co. (GT)
|Industry:||Rubber & Plastics|
Goodyear Tire & Rubber Co. has a 5-Year Projected Earnings Per Share Growth Rate of 27.80% and Forward Price/Earnings Ratio of 4.05 and Price/Earnings to Growth Ratio of 0.47. The short interest was 6.87% as of 06/01/2012. The Goodyear Tire & Rubber Company develops, manufactures, distributes, and sells tires, and related products and services worldwide. The company offers various lines of rubber tires for automobiles, trucks, buses, aircraft, motorcycles, farm implements, earthmoving and mining equipment, industrial equipment, and various other applications. It sells tires under the Goodyear, Dunlop, Kelly, Debica, Sava, Fulda, and various other Goodyear owned house brands, as well as under the private-label brands. The company is also involved in retreading truck, aviation, and off-the-road tires; manufacturing and selling tread rubber and other tire retreading materials; providing automotive repair services, and miscellaneous other products and services; and manufacturing and selling flaps for truck tires and other tires.
3) Rockwood Holdings, Inc. (ROC)
Rockwood Holdings, Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 26.29% and Forward Price/Earnings Ratio of 8.77 and Price/Earnings to Growth Ratio of 0.45. The short interest was 1.26% as of 06/01/2012. Rockwood Holdings, Inc. develops, manufactures, and markets specialty chemicals and materials for industrial and commercial applications primarily in Germany, the United States, and Europe. The company's specialty chemicals include lithium compounds and chemicals; metal surface treatment chemicals, including corrosion protection/prevention oils; natural and synthetic metal sulfides; and maintenance chemicals. Its specialty chemicals are use in automotive pre-coating metal treatment and car body pre-treatment; polymerization initiators for elastomers; steel and metal working; pharmaceutical synthesis and polymers in life sciences industry; batteries; and disc brakes, as well as for use in aircraft industry.
4) Jazz Pharmaceuticals plc (JAZZ)
Jazz Pharmaceuticals plc has a 5-Year Projected Earnings Per Share Growth Rate of 25.65% and Forward Price/Earnings Ratio of 7.67 and Price/Earnings to Growth Ratio of 0.61. The short interest was 5.05% as of 06/01/2012. Jazz Pharmaceuticals Public Limited Company, a specialty biopharmaceutical company, focuses on the identification, development, and commercialization of pharmaceutical products to meet unmet medical needs. Its marketed products include Xyrem, a sodium oxybate oral solution for the treatment of cataplexy and excessive daytime sleepiness in patients with narcolepsy; FazaClo (clozapine, USP) LD and FazaClo HD products, which are orally disintegrating clozapine tablets for the treatment of resistant schizophrenia; Luvox CR extended-release capsules for the treatment of obsessive compulsive disorder; and Prialt, a non-opioid intrathecal analgesic for refractory severe chronic pain. The company also offers women's health and other products, such as Elestrin for moderate-to-severe vasomotor symptoms associated with menopause; Natelle and Gesticare prescription prenatal vitamins; Urelle for irritative voiding, as well as for inflammation, hypermotility, and pain that accompany lower urinary tract infections; Gastrocrom oral concentrate for mastocytosis; Parcopa for idiopathic Parkinson's disease; and AVC (sulfanilamide) cream to treat vulvovaginitis caused by Candida albicans, as well as Niravam for the management of anxiety disorder or the short-term relief of symptoms of anxiety, as well as for panic disorder with or without agoraphobia.
5) Harman International Industries Inc. (HAR)
Harman International Industries Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 31.00% and Forward Price/Earnings Ratio of 9.80 and Price/Earnings to Growth Ratio of 0.30. The short interest was 2.38% as of 06/01/2012. Harman International Industries, Incorporated engages in the development, manufacture, and marketing of audio products and electronic systems primarily in the United States, Germany, and other parts of Europe. Its Automotive segment offers audio, electronic, and infotainment systems for vehicle applications to be installed primarily as original equipment by automotive manufacturers under the JBL, Infinity, Mark Levinson, Harman/Kardon, Logic 7, Lexicon, and Becker brand names. This segment also develops, manufactures, sells, and services audio systems under the Bowers & Wilkins brand name; and produces Harman/Kardon branded infotainment systems for Harley-Davidson touring motorcycles. The company's Consumer segment provides a range of audio and consumer electronics for home, multimedia, and mobile applications under the AKG, Harman/Kardon, Infinity, JBL, Mark Levinson, and Selenium brand names.
6) US Airways Group, Inc. (LCC)
US Airways Group, Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 38.50% and Forward Price/Earnings Ratio of 4.37 and Price/Earnings to Growth Ratio of 0.26. The short interest was 11.91% as of 06/01/2012. US Airways Group, Inc., through its subsidiaries, provides air transportation for passengers and cargo. It offers scheduled passenger service on approximately 3,100 flights daily to 200 communities in the United States, Canada, Mexico, Europe, the Middle East, the Caribbean, and Central and South America; and hourly shuttle service between Boston, LaGuardia, and Washington National. The company operates hubs in Charlotte, Philadelphia, and Phoenix; and a focus city in Washington, D.C.
7) Green Mountain Coffee Roasters Inc. (GMCR)
|Industry:||Processed & Packaged Goods|
Green Mountain Coffee Roasters Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 32.63% and Forward Price/Earnings Ratio of 7.12 and Price/Earnings to Growth Ratio of 0.33. The short interest was 18.58% as of 06/01/2012. Green Mountain Coffee Roasters, Inc. engages in the specialty coffee and coffee maker business. The company sources, produces, and sells approximately 200 varieties of coffee, cocoa, teas, and other beverages in K-Cup portion packs and coffee in traditional packaging, including whole bean and ground coffee selections in bags and ground coffee in fractional packs for use in at-home (AH) and away-from-home (AFH). It sells its products primarily in North America through supermarkets, club stores, and convenience stores; in restaurants and hospitality; and to office coffee distributors, as well as directly to consumers through its Website.
8) Allegheny Technologies Inc. (ATI)
Allegheny Technologies Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 37.16% and Forward Price/Earnings Ratio of 7.56 and Price/Earnings to Growth Ratio of 0.42. The short interest was 3.79% as of 06/01/2012. Allegheny Technologies Incorporated engages in the production of specialty metals worldwide. It operates in three segments: High Performance Metals, Flat-Rolled Products, and Engineered Products. The High Performance Metals segment provides a range of high performance alloys, including nickel- and cobalt-based alloys and super alloys; titanium and titanium-based alloys; exotic metals, such as zirconium, hafnium, niobium, nickel-titanium, and related alloys; and other specialty alloys primarily in long product forms consisting of ingots, billets, bars, shapes and rectangles, rods, wires, seamless tubes, and castings. This segment also offers forged and cast metal components, and machined parts for various load-bearing and fatigue-resisting applications in the jet engine, aerospace, and industrial markets.
9) Oasis Petroleum Inc. (OAS)
|Industry:||Independent Oil & Gas|
Oasis Petroleum Inc. has a 5-Year Projected Earnings Per Share Growth Rate of 26.67% and Forward Price/Earnings Ratio of 9.11 and Price/Earnings to Growth Ratio of 0.80. The short interest was 7.88% as of 06/01/2012. Oasis Petroleum Inc., an independent exploration and production company, engages in the acquisition and development of oil and natural gas resources in the Montana and North Dakota regions of the Williston Basin. The company's primary project areas include West Williston, East Nesson, and Sanish. As of December 31, 2011, it had approximately 78.
*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.