Are you looking for mid-sized companies that still have room to grow? Do you prefer stocks that pay solid dividend yields, but also have sustainable payout ratios to boot? Today we focused on stocks with these traits, but ones that also look undervalued from a price-multiple perspective, despite good analyst ratings. If stocks like this seem interesting, we think you'll like the list we came up with.
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 Price/Sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its twelve month trailing sales numbers. In the most basic terms it let's an investor know how much the investment community is willing to pay for every dollars worth of sales. A firm with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollars worth of a firm's sales. On the other hand, a firm is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community not hard rules to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share
We first looked for mid cap dividend stocks. We then looked for companies that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We next screened for businesses that appear undervalued from a price-multiple perspective (P/E<10)(P/S<1). We did not screen out any sectors.
Do you think these mid-cap stocks failed to price their value accurately? Use our list along with your own analysis.
1) Staples, Inc. (SPLS)
|Industry:||Specialty Retail, Other|
Staples, Inc. has a Dividend Yield of 3.41%, a Payout Ratio of 28.94%, a Analysts' Rating of 2.40, a Price/Earnings Ratio of 9.23, and a Price/Sales Ratio of 0.36. The short interest was 7.34% as of 06/07/2012. Staples, Inc., together with its subsidiaries, operates as an office products company. The company offers various office supplies and services, office machines and related products, computers and related products, and office furniture under Staples, Quill, and other proprietary brands. It also provides copy and print services to retail and delivery customers, as well as technology services through its EasyTech business.
2) Huntsman Corporation (HUN)
Huntsman Corporation has a Dividend Yield of 3.25%, a Payout Ratio of 28.57%, a Analysts' Rating of 2.50, a Price/Earnings Ratio of 8.85, and a Price/Sales Ratio of 0.26. The short interest was 5.77% as of 06/07/2012. Huntsman Corporation engages in the manufacture and sale of differentiated organic and inorganic chemical products worldwide. The company offers polyurethane chemicals, including methyl diphenyl diisocyanate, propylene oxide, polyols, propylene glycol, thermoplastic polyurethane, aniline, and methyl tertiary-butyl ether products, which are used to produce rigid and flexible foams, as well as coatings, adhesives, sealants, and elastomers; and performance products, such as amines, carbonates, surfactants, linear alkyl benzene, maleic anhydride, performance chemicals, ethylene glycol, olefins, and technology licenses. It also provides advanced materials comprising epoxy resin compounds and formulations; cross-linking, matting agents, and curing agents; and epoxy, acrylic and polyurethane-based adhesives, and tooling resin formulations.
3) Etablissements Delhaize Freres et Cie Le Lion S.A. (DEG)
Etablissements Delhaize Freres et Cie Le Lion S.A. has a Dividend Yield of 6.07%, a Payout Ratio of 51.33%, a Analysts' Rating of 2.00, a Price/Earnings Ratio of 8.92, and a Price/Sales Ratio of 0.14. The short interest was 0.16% as of 06/07/2012. Etablissements Delhaize Frres et Cie 'Le Lion' (Groupe Delhaize) SA, together with its subsidiaries, engages in the operation of food supermarkets in the United States, Belgium, southeastern Europe, and Asia. It also operates other store formats, such as proximity stores. In addition, the company is involved in food wholesaling to affiliated stores and independent wholesale customers; and in the retail of non-food products, such as pet products. As of December 31, 2011, it operated a network of 3,408 stores. The company was founded in 1867 and is based in Brussels, Belgium.
4) Gannett Co., Inc. (GCI)
|Industry:||Publishing - Newspapers|
Gannett Co., Inc. has a Dividend Yield of 6.23%, a Payout Ratio of 21.77%, a Analysts' Rating of 2.50, a Price/Earnings Ratio of 7.14, and a Price/Sales Ratio of 0.58. The short interest was 10.83% as of 06/07/2012. Gannett Co., Inc. operates as a media and marketing solutions company in the United States and internationally.
5) PartnerRe Ltd. (PRE)
|Industry:||Property & Casualty Insurance|
PartnerRe Ltd. has a Dividend Yield of 3.41%, a Payout Ratio of 26.74%, a Analysts' Rating of 2.50, a Price/Earnings Ratio of 8.21, and a Price/Sales Ratio of 0.84. The short interest was 1.12% as of 06/07/2012. PartnerRe Ltd., through its subsidiaries, provides reinsurance services worldwide. It offers reinsurance coverage to insurers for property damage or business interruption losses resulting from fires, catastrophes, and other perils covered in industrial and commercial property, and homeowners' policies; and casualty reinsurance, such as third party liability, employers' liability, workers' compensation, and personal accident coverage. The company also provides coverage against agricultural yield and price/revenue risks related to flood, drought, and hail, as well as diseases related to crops, livestock, and aquaculture; specialized reinsurance protection for airline, general aviation, and space insurance business; and property catastrophe reinsurance protection against the accumulation of losses caused by windstorm, earthquake, tornado, tropical cyclone, and flood.
6) Ternium S.A. (TX)
|Industry:||Steel & Iron|
Ternium S.A. has a Dividend Yield of 3.91%, a Payout Ratio of 32.11%, a Analysts' Rating of 2.00, a Price/Earnings Ratio of 8.02, and a Price/Sales Ratio of 0.42. The short interest was 0.21% as of 06/07/2012. Ternium S.A. engages in manufacturing and processing a range of flat and long steel products for construction, home appliances, capital goods, container, food, energy, and automotive industries. The company operates in three segments: Flat Steel Products, Long Steel Products, and Other Products. The Flat Steel Products segment manufactures and markets slabs, hot rolled coils and sheets, cold rolled coils and sheets, tin plate, hot dipped galvanized and electro-galvanized sheets, pre-painted sheets, beams, roll formed products, and other tailor-made products, as well as steel pipes and tubular products, such as tubes for general use, structural tubes, tubes for mechanical applications, conduction tubes, conduction electrical tubes, and oil tubes.
7) Pitney Bowes Inc. (PBI)
Pitney Bowes Inc. has a Dividend Yield of 10.67%, a Payout Ratio of 73.96%, a Analysts' Rating of 2.40, a Price/Earnings Ratio of 7.07, and a Price/Sales Ratio of 0.54. The short interest was 26.83% as of 06/07/2012. Pitney Bowes Inc. provides software, hardware, and services to enable physical and digital communications. It also offers a suite of equipment, supplies, software, services, and solutions for managing and integrating physical and digital communication channels. The company's Small & Medium Business Solutions group engages in the sale, rental, and financing of mail finishing, mail creation, and shipping equipment and software; provision of supply, support, and other professional services; and provision of payment solutions.
8) GameStop Corp. (GME)
GameStop Corp. has a Dividend Yield of 3.10%, a Payout Ratio of 5.96%, a Analysts' Rating of 2.40, a Price/Earnings Ratio of 8.03, and a Price/Sales Ratio of 0.28. The short interest was 46.68% as of 06/07/2012. GameStop Corp. operates as a video game retailer. It sells new and used video game hardware; physical and digital video game software; and accessories and other products that primarily include controllers, memory cards, and other add-ons, as well as strategy guides, magazines, and trading cards. The company also offers personal computer (PC) entertainment and other software across various genres, including sports, action, strategy, adventure/role playing, and simulation, as well as products that relate to the digital category comprising network point cards, prepaid digital and online timecards, and digitally downloadable software.
*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.