Are you looking for large-cap companies that could still grow to new heights? Today we looked for large caps of this nature, while focusing on those that also look undervalued from a price-multiple standpoint. As a way to detect the cream of the crop, we focused in on stocks with strong analyst backing. We came up with an interesting list, but first let us tell you a bit about how we screened.
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 lets 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 dollar's 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
The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the earnings forecast instead. While this number might not be as accurate because it uses "forecast" numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number the more a firm is financing its assets internally through stockholder equity. The higher this metric is the more the firm is relying on debt to finance its assets.
We first looked for large-cap stocks. Next, we then screened for businesses that analysts rate as "Strong Buy" (mean recommendation < 2). We then screened for businesses that are trading at a discount (P/S<1)(forward P/E<10). We did not screen out any sectors.
Do you think these large-cap stocks will go up in price? Use our list to help with your own analysis.
1) Honda Motor Co., Ltd. (HMC)
|Industry:||Auto Manufacturers - Major|
Honda Motor Co., Ltd. has an Analysts' Rating of 1.50, a Price/Sales Ratio of 0.59, and a Forward Price/Earnings Ratio of 9.14. The short interest was 0.04% as of 06/20/2012. Honda Motor Co., Ltd., together with its subsidiaries, engages in the development, manufacture, and distribution of motorcycles, automobiles, and power products primarily in North America, Europe, and Asia.
2) Prudential plc (PUK)
Prudential plc has a Analysts' Rating of 1.00, a Price/Sales Ratio of 0.51, and a Forward Price/Earnings Ratio of 9.52. The short interest was 0.01% as of 06/20/2012. Prudential plc, together with its subsidiaries, provides retail financial products and services, and asset management services to individuals and businesses in Asia, the United States, and the United Kingdom.
3) Telefonica, S.A. (TEF)
|Industry:||Telecom Services - Foreign|
Telefonica, S.A. has a Analysts' Rating of 1.00, a Price/Sales Ratio of 0.72, and a Forward Price/Earnings Ratio of 6.44. The short interest was 0.82% as of 06/20/2012. Telefnica, S.A. provides fixed and mobile telephony services primarily in Spain, Latin America, and rest of Europe. It offers various mobile and related services and products that consist of mobile voice services, value added services, mobile data and Internet services, wholesale services, corporate services, roaming, fixed wireless, and trunking and paging services.
4) Mitsui & Co. Ltd. (MITSY)
Mitsui & Co. Ltd. has a Analysts' Rating of 1.00, a Price/Sales Ratio of 0.49, and a Forward Price/Earnings Ratio of 4.15. The short interest was 0.02% as of 06/20/2012. Mitsui & Co., Ltd. operates as a general trading company in Japan and internationally. The company is involved in arranging financing for customers and suppliers in connection with its trading activities, organizing and coordinating industrial projects, participating in financing and investing arrangements, assisting in the procurement of raw materials and equipment, providing new technologies and processes for manufacturing, and coordinating transportation and marketing of finished goods.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.