Do you prefer investing in well established financial companies that can offer reliable returns? One place to look is in the large cap camp; large caps can offer stability that smaller cap stocks usually can't. We ran a screen for large cap financial stocks that having positive analyst ratings, but also look undervalued from a price-multiple perspective. You might like the list we came up with.
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 PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share [EPS], and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive) - a PEG ratio of 1 means the company is fairly priced.
We first looked for large cap financial stocks. We then screened for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). Next, we then screened for businesses that are undervalued (P/BV<1)(PEG < 1).
Do you think these large-cap stocks are worth more than their current valuations? Use this list as a starting-off point for your own analysis.
1) The Bank of New York Mellon Corporation (BK)
The Bank of New York Mellon Corporation has a Analysts' Rating of 2.50, a Price/Book Value Ratio of 0.74, and a Price/Earnings to Growth Ratio of 0.86. The short interest was 1.29% as of 06/28/2012. The Bank of New York Mellon Corporation, a financial services company, provides various products and services worldwide. The company offers a range of equity, fixed income, cash, and alternative/overlay products, as well as distributes investment management products. It also provides investment management, wealth and estate planning, and private banking solutions to high-net-worth individuals and families, charitable gift programs, endowments and foundations, and related entities, as well as offers mutual funds, separate accounts, and annuities.
2) American International Group, Inc. (AIG)
|Industry:||Property & Casualty Insurance|
American International Group, Inc. has a Analysts' Rating of 2.30, a Price/Book Value Ratio of 0.53, and a Price/Earnings to Growth Ratio of 0.20. The short interest was 4.11% as of 06/28/2012. American International Group, Inc. engages in the provision of insurance products and services for the commercial, institutional, and individual customers in the United States and internationally. The company operates in three segments: Chartis, SunAmerica Financial Group, and Aircraft Leasing. The Chartis segment offers casualty insurance products that cover general liability, commercial automobile liability, workers' compensation, excess casualty, and crisis management coverages; industrial and commercial property insurance products and energy, which covers man-made and natural disaster exposures; environmental, political risk, trade credit, surety, marine, and aerospace insurance products; and various forms of professional liability insurance products.
3) CME Group Inc. (CME)
|Industry:||Investment Brokerage - National|
CME Group Inc. has a Analysts' Rating of 2.40, a Price/Book Value Ratio of 0.81, and a Price/Earnings to Growth Ratio of 0.89. The short interest was 2.91% as of 06/28/2012. CME Group Inc. operates the CME, CBOT, NYMEX and COMEX futures exchanges worldwide. The company provides a range of products across various asset classes, such as interest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather, and real estate. It owns and operates CME Clearing, a clearing house that provides clearing, settlement, and guarantees services for exchange-traded contracts and over-the-counter derivatives transactions; and is involved in the real estate operations.
4) Shinhan Financial Group Company Limited (SHG)
|Industry:||Foreign Regional Banks|
Shinhan Financial Group Company Limited has a Analysts' Rating of 2.00, a Price/Book Value Ratio of 0.74, and a Price/Earnings to Growth Ratio of 0.96. The short interest was 0.02% as of 06/28/2012. Shinhan Financial Group Co., Ltd. and its subsidiaries provide a range of financial products and services to corporations, governments, institutions, and individuals in Korea and internationally.
5) Prudential Financial, Inc. (PRU)
Prudential Financial, Inc. has a Analysts' Rating of 1.90, a Price/Book Value Ratio of 0.63, and a Price/Earnings to Growth Ratio of 0.96. The short interest was 1.46% as of 06/28/2012. Prudential Financial, Inc., through its subsidiaries, provides various financial products and services, including life insurance, annuities, retirement-related services, mutual funds, and investment management services in the United States, Asia, Europe, and Latin America.
*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.