When analysts rate a company's stock as a 'Strong Buy', it's a sign that there are a variety of things that the company is doing right. It also means there is high confidence that the stock is going to grow in value. Today we focus on financial stocks with high analyst ratings, but that also look undervalued from a price-multiple standpoint. We came up with a short and diverse list, but we think you'll find it interesting.
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.
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 let's 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 dollars 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
We first looked for financial stocks. We then screened for businesses that are undervalued (P/BV<1)(P/S<1). We next screened for businesses that analysts rate as "Strong Buy" (mean recommendation < 2). We did not screen out any market caps.
Do you think these stocks hold solid value? Use our list to help with your own analysis.
1) Federal Agricultural Mortgage Corp. (NYSE:AGM)
Federal Agricultural Mortgage Corp. has a Price/Book Value Ratio of 0.81, a Price/Sales Ratio of 0.96, and a Analysts' Rating of 1.00. The short interest was 3.78% as of 06/24/2012. Federal Agricultural Mortgage Corporation provides a secondary market for various loans made to borrowers in the United States. It engages in purchasing eligible loans directly from lenders; providing advances against eligible loans by purchasing obligations secured by those loans; securitizing assets and guaranteeing the payment of principal and interest on the resulting securities that represent interests in or obligations secured by pools of eligible loans; and issuing long-term standby purchase commitments (LTSPCs) for eligible loans. The company also purchases or commits to purchase eligible mortgage loans secured by first liens on agricultural real estate; purchases the portions of certain agricultural, rural development, business and industry, and community facilities loans guaranteed by the United States Department of Agriculture.
2) ORIX Corp. (NYSE:IX)
ORIX Corp. has a Price/Book Value Ratio of 0.54, a Price/Sales Ratio of 0.79, and a Analysts' Rating of 1.00. The short interest was 0.01% as of 06/24/2012. ORIX Corporation, an integrated financial services company, provides various products and services to corporate and retail customers in Japan and internationally. It operates in six segments: Corporate Financial Services, Maintenance Leasing, Real Estate, Investment Banking, Retail, and Overseas Business. The Corporate Financial Services segment engages in lending, leasing, and commission business for the sale of financial products; and environment-related businesses. The Maintenance Leasing segment involves in automobile and rental operations.
3) Gazit-Globe, Ltd. (NYSE:GZT)
|Industry:||Real Estate Development|
Gazit-Globe, Ltd. has a Price/Book Value Ratio of 0.84, a Price/Sales Ratio of 0.89, and a Analysts' Rating of 1.00. Gazit-Globe Ltd., through its subsidiaries, engages in the acquisition, development, and management of income producing properties in North America, Europe, Israel, and Brazil. The company focuses on the supermarket-anchored shopping centers. It also engages in the development, management, and construction of real estate projects.
*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.