In this article, I will run you through my quick analysis for 2 stocks that I believe are undervalued and have solid upside potentials based on the fundamentals. Even with the following information, your further research is still warranted.
Valmont Industries (VMI)
VMI engages in manufacturing and distributing pole structures and agriculture irrigation equipments. The stock has recently dropped from its 52-week high of $128.40, but still returned 26.43% YTD. At the current price of $113.40, VMI is trading at 14.0x the current fiscal year estimated EPS and 8.6x the LTM EBITDA. I believe the current valuation is attractive and a solid upside exists based on the following reasons:
- Taking the growth prospects into consideration, the stock is trading at a 3-year expected PEG of 0.68x, indicating a discount to the future growth.
- I have performed the following comparable analysis for major agriculture manufacturers. On the P/E basis, VMI is trading at a slight discount to the group average. I believe the discount is unwarranted given the firm's large market share and superior profitability relative to its peers.
- VMI has a solid balance sheet. It currently has $340M in cash and $487M in debt. The current and quick ratios are excellent at 3.2x and 2.0x, respectively. The LTM interest coverage ratio is very safe at 8.4x.
- One of the directors recently purchased $112,470 in shares at an average cost of $112.47.
- Sell-side analysts are very bullish on the stock. Of the 9 analyst ratings for the company, there are 4 strong buys, 2 buys, and 3 holds. The mean target price is $138.86, indicating a decent 22.5% upside potential. Stifel Nicolaus has recently reiterated their buy rating for the stock and lifted the target price to $150 from $129.
- According to below, analysts' EPS estimated has been revised upwards over the past 90 days.
- VMI has consistently beaten both revenue and EPS estimates over the past 6 consecutive quarters.
- Jim Cramer was also bullish on the stock in his Lightning Round program on Friday June 8.
- The stock has a dividend yield of 0.8%.
In my past article, I have performed a detailed analysis for CROX. The following is another quick analysis based on different perspectives to support my bullish view on CROX.
Although the stock has returned 11.24% YTD, it has recently declined 13.25% over the past 3 months and touched its 52-week low of $14.20. At the current price of $16.16, the stock is trading at 11.1x the current fiscal year estimated EPS and 7.2x the LTM EBITDA. My bullish view is supported by the following reasons:
- Taking the growth prospects into consideration, CROX is trading at a 3-year PEG of 0.55x, suggesting a significant discount to the future growth.
- Based on the comparable analysis from my last article, CROX demonstrates superior financial performance in terms of growth prospects, profitability, and liquidity relative to its industry peers. Thus a valuation premium ranging from 10-20% should be warranted. According to the valuation table below, with a 10% valuation premium, the fair value for CROX should be $23.45, implying a solid 45% upside potential.
- CROX has a solid balance sheet. It is currently sitting on $207M cash and only $24M debt, amounting to a net cash per share of $2. Its current and quick ratios are very healthy at 3.1x and 2.1x, respectively.
- Over the past 8 quarters, CROX only slightly missed its revenue estimate once in Q4 2011.
- Sell-side analysts are very bullish on the stock. Of the 11 analyst ratings for the company, there are 4 strong buys, 3 buys, 3 holds, and 1 underperform. The mean target price is $25.88, indicating a decent 60% upside potential. Standpoint Research has recently upgraded their rating for the stock to buy from hold with a target price of $25.
- According to below, although the current fiscal year estimated EPS has been revised downwards slightly over the past 30 days, EPS estimate for the next fiscal year has solid upward revisions over the past 90 days.
Comparable Analysis table is created by author, EPS table is sourced from Yahoo Finance, and financial data is sourced from company 10-Q, 10-K, press release, Yahoo Finance, YCharts, Wall Street Journal, Thomson One, Bloomberg and Morningstar.