Mid-cap stocks provide a unique investment opportunity. After all, mid caps by definition have room to grow to join the ranks of their larger cap peers. Today, we screened for mid caps that have strong growth on the horizon, and that also look undervalued from a price-multiple perspective. We think you'll find the list we came up with rather interesting.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
The Price/Cash Flow ratio is a price-multiple valuation metric that also measures a firm's future financial health. An advantage of using cash flow is that it removes non-cash factors, which helps provide a clearer picture of how much money the firm is taking in from a valuation standpoint. Price/Cash Flow Ratio = Current Stock Price/Cash Flow Per Share
The Price/Book Value Ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a Price/Book Value Ratio of less than 1 it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
We first looked for mid cap stocks. We then looked for companies with projected high growth, measured by 1-year projected EPS growth above 25%. Next, we then screened for businesses that are trading at low price-multiple valuations (P/CFO<10)(P/BV<1). We did not screen out any sectors.
Do you think these mid-cap stocks will go up in valuation? Use our list to help with your own analysis.
1) Legg Mason Inc. (LM)
Legg Mason Inc. has a 1-Year Projected Earnings Per Share Growth Rate of 25.77%, a Price/Cash Flow Ratio of 1.96, and a Price/Book Value Ratio of 0.64. The short interest was 4.87% as of 06/20/2012. Legg Mason, Inc. provides asset management and related financial services to institutional and individual clients, company-sponsored mutual funds, and other pooled investment vehicles worldwide. The company offers investment advisory services, including the discretionary and non-discretionary management of separate investment accounts in various investment styles for institutional and individual investors; and investment products, such as mutual funds comprising fixed income, equity funds, money market, and other liquidity products, as well as funds-of-hedge funds, and other domestic and offshore funds for retail and institutional investors. It serves various customers directly, as well as through various financial intermediaries.
2) Regions Financial Corp. (RF)
|Industry:||Regional - Southeast Banks|
Regions Financial Corp. has a 1-Year Projected Earnings Per Share Growth Rate of 28.33%, a Price/Cash Flow Ratio of 4.67, and a Price/Book Value Ratio of 0.54. The short interest was 1.58% as of 06/20/2012. Regions Financial Corporation operates as the holding company for Regions Bank that provides a range of commercial, retail, and mortgage banking services in the United States. It offers various deposit products, including savings and transaction accounts; demand deposit accounts; money market accounts; and time deposits, such as certificate of deposits and individual retirement accounts. The company's loan portfolio comprises commercial loans, such as commercial and industrial, and owner occupied commercial real estate mortgage and construction loans; investor real estate loans, including commercial real estate mortgage and construction loans; and consumer loans, which consist of residential first mortgage, home equity, indirect, consumer credit card, and other consumer loans. Regions Financial Corporation, through other subsidiaries, also provides regional brokerage and investment banking products and services, such as securities brokerage, trust, asset management, financial planning, mutual funds, securities underwriting, sales and trading, and investment banking services for individual and institutional investors; and insurance brokerage services for various lines of personal and commercial insurance comprising property, casualty, life, health, and accident.
3) E*TRADE Financial Corporation (ETFC)
|Industry:||Investment Brokerage - National|
E*TRADE Financial Corporation has a 1-Year Projected Earnings Per Share Growth Rate of 30.00%, a Price/Cash Flow Ratio of 0.67, and a Price/Book Value Ratio of 0.46. The short interest was 3.33% as of 06/20/2012. E*TRADE Financial Corporation, a financial services company, provides online brokerage and related products and services primarily to individual retail investors under the E*TRADE Financial brand in the United States. It offers trading products and services, including automated order placement and execution of the U.S.
4) Zions Bancorp. (ZION)
|Industry:||Regional - Pacific Banks|
Zions Bancorp. has a 1-Year Projected Earnings Per Share Growth Rate of 44.53%, a Price/Cash Flow Ratio of 3.31, and a Price/Book Value Ratio of 0.56. The short interest was 8.91% as of 06/20/2012. Zions Bancorporation, a bank and financial holding company, provides a range of banking and related services in the United States. The company offers community banking services, including small and medium-sized business and corporate banking; commercial and residential development, construction, and term lending; retail banking; treasury cash management and related products and services; residential mortgage; trust and wealth management; and investment activities. It also offers personal banking services, including home mortgages, bankcard, installment loans, home equity lines of credit, checking accounts, savings accounts, time certificates of deposits, safe deposit facilities, direct deposits, and automated teller machine access. In addition, the company provides online and traditional brokerage services; and municipal finance advisory and underwriting services; and small business administration loans.
5) China Southern Airlines Co. Ltd. (ZNH)
China Southern Airlines Co. Ltd. has a 1-Year Projected Earnings Per Share Growth Rate of 28.10%, a Price/Cash Flow Ratio of 2.76, and a Price/Book Value Ratio of 0.91. The short interest was 0.24% as of 06/20/2012. China Southern Airlines Company Limited provides commercial airline services in the People's Republic of China, Hong Kong, Macau, Taiwan, and internationally. It principally engages in the provision of passenger, air cargo, and mail airline services. The company also offers logistics services; air catering services; property management services; aircraft and engine repair and maintenance services; pilot training services; flight simulation services; and airport ground services. As of December 31, 2010, it had a fleet of 422 aircraft, as well as a network reaching 898 destinations connecting 169 countries and regions, and cities worldwide. The company was founded in 1995 and is headquartered in Guangzhou, the People's Republic of China.
6) Genworth Financial Inc. (GNW)
Genworth Financial Inc. has a 1-Year Projected Earnings Per Share Growth Rate of 82.50%, a Price/Cash Flow Ratio of 0.64, and a Price/Book Value Ratio of 0.18. The short interest was 2.19% as of 06/20/2012. Genworth Financial, Inc., a financial security company, provides insurance, wealth management, investment, and financial solutions in the United States and internationally. The company offers various insurance and fixed annuity products, including life and long-term care insurance products; payment protection insurance products for consumers primarily to meet specified payment obligations; and wealth management products, such as managed account programs with advisor support and financial planning services. It also provides mortgage insurance products and related services to insure prime-based, individually underwritten residential mortgage loans or flow mortgage insurance; and mortgage insurance on a structured or bulk basis, as well as offers services, analytical tools, and technology that enable lenders to operate and manage risk.
7) MGM Resorts International (MGM)
|Industry:||Resorts & Casinos|
MGM Resorts International has a 1-Year Projected Earnings Per Share Growth Rate of 56.50%, a Price/Cash Flow Ratio of 3.33, and a Price/Book Value Ratio of 0.93. The short interest was 9.00% as of 06/20/2012. MGM Resorts International, through its subsidiaries, owns and operates casino resorts. Its casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities. The company also owns and operates Shadow Creek golf course in North Las Vegas; Fallen Oak golf course in Saucier, Mississippi; and the Primm Valley golf club at the California state line.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.