5 Highly Liquid Stocks Under $5 Undervalued By The Graham Number

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Includes: FRM, HL, LSCC, PCO, SYRG
by: Kapitall

Do you prefer searching for stocks that appear undervalued? For a closer look at some potentially undervalued names, we ran a screen.

We began by screening for stocks trading under $5 a share with strong liquidity, indicated by current ratios above 3. The current ratio is current assets/current liabilities, so ratios above 3 indicate the company has at least 3 times the liquid assets to cover their short-term liabilities.

We then screened for those that also appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.

It is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

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 are being undervalued by the market? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

1. Furmanite Corporation (NYSE:FRM): Provides technical services in Europe, North America, South America, Latin America, the Middle East, Africa, and the Asia Pacific. Market cap at $158.69M, most recent closing price at $4.26. Current ratio at 3.57. Diluted TTM earnings per share at 0.51, and a MRQ book value per share value at 3.22, implies a Graham Number fair value = sqrt(22.5*0.51*3.22) = $6.08. Based on the stock's price at $4.41, this implies a potential upside of 37.84% from current levels.

2. Hecla Mining Co. (NYSE:HL): Engages in the discovery, acquisition, development, production, and marketing of silver, gold, lead, and zinc. Market cap at $1.34B, most recent closing price at $4.69. Current ratio at 3.63. Diluted TTM earnings per share at 0.4, and a MRQ book value per share value at 4.03, implies a Graham Number fair value = sqrt(22.5*0.4*4.03) = $6.02. Based on the stock's price at $4.58, this implies a potential upside of 31.49% from current levels.

3. Lattice Semiconductor Corporation (NASDAQ:LSCC): Designs, develops, manufactures, and markets programmable logic products and related software. Market cap at $529.69M, most recent closing price at $4.49. Current ratio at 5.6. Diluted TTM earnings per share at 0.5, and a MRQ book value per share value at 3.28, implies a Graham Number fair value = sqrt(22.5*0.5*3.28) = $6.07. Based on the stock's price at $4.67, this implies a potential upside of 30.08% from current levels.

4. Synergy Resources Corporation (NYSEMKT:SYRG): Engages in the acquisition, exploitation, exploration, development, and production of oil and natural gas properties primarily located in the Wattenberg field in Denver-Julesburg Basin in northeast Colorado. Market cap at $131.1M, most recent closing price at $2.55. Current ratio at 3.09. Diluted TTM earnings per share at 0.23, and a MRQ book value per share value at 1.87, implies a Graham Number fair value = sqrt(22.5*0.23*1.87) = $3.11. Based on the stock's price at $2.64, this implies a potential upside of 17.83% from current levels.

5. Pendrell Corporation (NASDAQ:PCO): Provides corporate intellectual property solutions and litigation insights to Fortune 500 companies and technology firms worldwide. Market cap at $284.62M, most recent closing price at $1.09. Current ratio at 4.53. Diluted TTM earnings per share at 0.06, and a MRQ book value per share value at 1.19, implies a Graham Number fair value = sqrt(22.5*0.06*1.19) = $1.27. Based on the stock's price at $1.1, this implies a potential upside of 15.23% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, 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.