Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message|
( followers)  

Earnings season kicks off next week, with Alcoa announcing its second quarter earnings results -do you have a watch list ready? We ran a screen with this idea in mind.

We began by screening for stocks that are reporting their second-quarter earnings results next week. We then screened for those with positive market sentiment, rallying above their 20-day, 50-day, and 200-day moving averages.

We then screened for those that also appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.

It is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall.

Do you think these stocks will price in more value after a favorable earnings report? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

1. Webster Financial Corp. (WBS): Operates as the holding company for the Webster Bank that provides various banking and financial products and services in southern New England and eastern New York State. Market cap at $1.93B. Price at $21.95. Earnings to be released on 07/13. The stock is currently trading 6.13% above its 20-day moving average, 5.20% above its 50-day MA, and 7.89% above its 200-day MA. Diluted TTM earnings per share at 1.67, and a MRQ book value per share value at 21.39, implies a Graham Number fair value = sqrt(22.5*1.67*21.39) = $28.35. Based on the stock's price at $21.21, this implies a potential upside of 33.66% from current levels.

2. Wells Fargo & Company (WFC): Provides retail, commercial, and corporate banking services primarily in the United States. Market cap at $177.91B. Price at $33.48. Earnings to be released on 07/13. The stock is currently trading 3.72% above its 20-day moving average, 3.60% above its 50-day MA, and 14.13% above its 200-day MA. Diluted TTM earnings per share at 2.9, and a MRQ book value per share value at 25.45, implies a Graham Number fair value = sqrt(22.5*2.9*25.45) = $40.75. Based on the stock's price at $32.58, this implies a potential upside of 25.08% from current levels.

3. Independent Bank Corp. (INDB): Operates as the bank holding company for Rockland Trust Company that provides commercial and retail banking, and wealth management services in Massachusetts. Market cap at $646.87M. Price at $29.92. Earnings to be released on 07/09. The stock is currently trading 8.36% above its 20-day moving average, 8.62% above its 50-day MA, and 12.87% above its 200-day MA. Diluted TTM earnings per share at 2.16, and a MRQ book value per share value at 22.16, implies a Graham Number fair value = sqrt(22.5*2.16*22.16) = $32.82. Based on the stock's price at $28.14, this implies a potential upside of 16.62% from current levels.

4. Lakeland Bancorp Inc. (LBAI): Operates as the bank holding company of Lakeland Bank, which provides various commercial and consumer banking products and services to small and medium-sized businesses, professionals, and individuals primarily in northern New Jersey. Market cap at $294.78M. Price at $10.93. Earnings to be released on 07/09. The stock is currently trading 10.48% above its 20-day moving average, 16.08% above its 50-day MA, and 24.69% above its 200-day MA. Diluted TTM earnings per share at 0.69, and a MRQ book value per share value at 8.97, implies a Graham Number fair value = sqrt(22.5*0.69*8.97) = $11.80. Based on the stock's price at $10.2, this implies a potential upside of 15.69% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 4 Rallying Companies Releasing Earnings Next Week Undervalued By The Graham Number