5 Undervalued, Highly Shorted Stocks With Impressive Profitability

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Includes: BPI, JOSB, KRO, SBUX, WTW
by: Kapitall

Do you consider yourself a contrarian investor? For ideas on how to start your own contrarian search, we ran a screen.

We began by screening for stocks with bearish sentiment, with float shorts above 10%. We then screened for those that also appear undervalued relative to earnings growth, with PEG below 1.

Finally, we screened for those with strong profitability compared to industry peers, with higher gross, operating, and pretax margins than their industry averages by at least 5% on each margin. This indicates that these companies are taking a greater percentage of their revenues as profits, and they also have stronger control over their cost structures.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall.

Do you think these stocks have excessive pessimism? Use this list as a starting point for your own analysis.

List sorted by distance between pretax margin and industry average.

1. Kronos Worldwide Inc. (NYSE:KRO): Engages in the production and marketing of titanium dioxide pigments in North America and Europe. Market cap at $1.98B, most recent closing price at $16.66. Float short at 24.56%. PEG at 0.71. TTM gross margin at 43.72% vs. industry average at 37.36%. TTM operating margin at 31.4% vs. industry average at 16.98%. TTM pretax margin at 30.29% vs. industry average at 15.8%.

2. Bridgepoint Education, Inc. (NYSE:BPI): Provides postsecondary education services. Market cap at $972.39M, most recent closing price at $18.60. Float short at 18.34%. PEG at 0.38. TTM gross margin at 73% vs. industry average at 51.73%. TTM operating margin at 26.28% vs. industry average at 18.96%. TTM pretax margin at 25.44% vs. industry average at 15.9%.

3. Weight Watchers International, Inc. (NYSE:WTW): Provides weight management services worldwide. Market cap at $3.11B, most recent closing price at $55.96. Float short at 19.19%. PEG at 0.97. TTM gross margin at 59.88% vs. industry average at 51.73%. TTM operating margin at 28.22% vs. industry average at 18.96%. TTM pretax margin at 24.95% vs. industry average at 15.9%.

4. Teavana Holdings, Inc. (TEA): Operates as a specialty retailer of loose-leaf teas, teawares, and other tea-related merchandise. Market cap at $545.92M, most recent closing price at $14.22. Float short at 19.75%. PEG at 0.98. TTM gross margin at 63.74% vs. industry average at 37.72%. TTM operating margin at 17.63% vs. industry average at 10.55%. TTM pretax margin at 16.87% vs. industry average at 9.84%.

5. Jos. A Bank Clothiers Inc. (NASDAQ:JOSB): Design, retails, and direct-markets men's tailored and casual clothing and accessories. Market cap at $1.15B, most recent closing price at $41.05. Float short at 12.63%. PEG at 0.81. TTM gross margin at 64.52% vs. industry average at 37.72%. TTM operating margin at 15.67% vs. industry average at 10.55%. TTM pretax margin at 15.66% vs. industry average at 9.84%.

*Profitability data sourced from Fidelity, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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