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In this article, I will run you through my comparable analysis for two stocks that have experienced substantial pullbacks and thus are significantly undervalued in my opinion. The following information serves as a helpful introduction, but your further research is still warranted.

Halliburton Company (NYSE:HAL)

Halliburton's shares have declined 40.94% over the past 12 months, driven primarily by equity market softness and underperforming energy prices. At $27.80 per share, Halliburton is trading at 4.3x the NTM EBITDA and 8.6x the NTM EPS. Consensus estimates expect revenues, EBITDA, and EPS to grow at a two-year CAGR of 11.6%, 9.5%, and 8.5%, respectively, over the current and next fiscal years. Taking this into prospective, the stock trades at a PEG ratio of 0.4x, implying a substantial discount to the growth potential.

The table below shows my comparable analysis that includes major firms in the oil and gas service sector. Compared to its peers, Halliburton has a relatively slow growth potential, but the firm is the most profitable and also has the best liquidity position in the group. As such, a valuation premium of about 10% would likely make sense. To justify the current market price of $27.80 by using the relative valuation model shown below, a valuation discount of 15% (highlighted below) is actually required on both the average P/E and EV/EBITDA multiples, suggesting the market does not give enough credit for Halliburton's solid performance relative to its peers.

Click to enlarge

Abercrombie & Fitch Company (NYSE:ANF)

Abercrombie & Fitch stock has plunged 54.10% over the past 12 months. At the current price of $30.71, Abercrombie & Fitch is trading at 3.0x the NTM EBITDA and 8.5x the NTM EPS. Revenue, EBITDA, and EPS are estimated by the analysts to rise by a two-year CAGR of 11.7%, 21.9%, and 72.8% over FY2012 and FY2013, which give a PEG ratio of 0.4x, substantially lower than the peer average (see below).

Based on the comparable analysis for major US fashion apparel retailers shown below, Abercrombie & Fitch has the highest growth potential. Given that the company slightly underperforms in many of the profitability and liquidity measures relative to its peers, a valuation discount of 10% to 20% should be reasonable. Again, to test the current market price of $30.71, the relative valuation model requires a whopping discount of 40% (highlighted below) on both the average P/E and EV/EBITDA multiples, suggesting the stock pullback is overblown.

The bottom line is that the lofty valuation discounts indeed provide investors a solid margin of safety. I believe the two companies' operations remain in good shape and the market is over-discounting the negativity. As such, I advise investors to buy on the dip.

The tables are created by author and financial data is sourced from company 10-Q, 10-K, press release, Yahoo Finance, YCharts, Wall Street Journal, Thomson One, Bloomberg, CapitalIQ and Morningstar.

Source: Halliburton And Abercrombie & Fitch Offer Great Value