Do you adhere to the principles of value investing? If so, here's a list you may be interested in.
We began by screening for stocks that appear highly undervalued: those with PEG ratios below 1 and P/FCF ratios below 15.
Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:
= (Net Profit/Equity)
= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)
= (Net Profit margin)*(Asset turnover)*(Leverage ratio)
Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these positive characteristics: Increasing ROE along with,
•Decreasing leverage, (i.e. decreasing Asset/Equity ratio)
•Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
For an interactive version of this chart, click on the image below.
Tool provided by Kapitall.
Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.
List sorted by PEG.
1. GT Advanced Technologies Inc. (GTAT): Provides polysilicon production technology and multicrystalline ingot growth systems, and related photovoltaic manufacturing services for the solar industry worldwide. Market cap at $616.55M. Price at $5.03. PEG at 0.35. P/FCF at 3.64. MRQ net profit margin at 22.34% vs. 19.1% year/year. MRQ sales/assets at 0.312 vs. 0.241 y/y. MRQ assets/equity at 3.416 vs. 5.577 y/y.
2. HCA Holdings, Inc. (HCA): Offers healthcare services in the United States. Market cap at $12.47B. Price at $27.74. PEG at 0.44. P/FCF at 10.9. MRQ net profit margin at 5.87% vs. 2.98% y/y. MRQ sales/assets at 0.339 vs. 0.338 y/y. MRQ assets/equity at -3.151 vs. -2.666 y/y.
3. WellCare Health Plans, Inc. (WCG): Provides managed care services for government-sponsored healthcare programs in the United States. Market cap at $2.28B. Price at $62.86. PEG at 0.49. P/FCF at 14.41. MRQ net profit margin at 2.86% vs. 1.45% y/y. MRQ sales/assets at 0.666 vs. 0.656 y/y. MRQ assets/equity at 2.276 vs. 2.623 y/y.
4. TPC Group Inc (TPCG): Produces specialized lines of chemical products to chemical and petroleum based companies worldwide. Market cap at $611.29M. Price at $38.27. PEG at 0.6. P/FCF at 8.01. MRQ net profit margin at 2.96% vs. 2.05% y/y. MRQ sales/assets at 0.571 vs. 0.565 y/y. MRQ assets/equity at 3.455 vs. 3.641 y/y.
5. Express Inc. (EXPR): Operates specialty retail stores in the United States. Market cap at $1.62B. Price at $18.25. PEG at 0.63. P/FCF at 11.14. MRQ net profit margin at 8.48% vs. 7.49% y/y. MRQ sales/assets at 0.564 vs. 0.562 y/y. MRQ assets/equity at 2.692 vs. 4.975 y/y.
6. DFC Global Corp. (DLLR): Provides retail financial services to unbanked and under-banked consumers, and small businesses. Market cap at $809.49M. Price at $18.47. PEG at 0.64. P/FCF at 8.72. MRQ net profit margin at 11.67% vs. 7.94% y/y. MRQ sales/assets at 0.153 vs. 0.127 y/y. MRQ assets/equity at 3.618 vs. 5.611 y/y.
7. Kadant Inc. (KAI): Develops, manufactures, and markets equipment and products for the papermaking and paper recycling industries. Market cap at $272.38M. Price at $23.54. PEG at 0.65. P/FCF at 11.99. MRQ net profit margin at 8.38% vs. 8.08% y/y. MRQ sales/assets at 0.232 vs. 0.205 y/y. MRQ assets/equity at 1.555 vs. 1.607 y/y.
8. Valassis Communications Inc. (VCI): Operates as a media and marketing services company primarily in the United States. Market cap at $936.44M. Price at $21.68. PEG at 0.65. P/FCF at 5.49. MRQ net profit margin at 5.09% vs. 3.91% y/y. MRQ sales/assets at 0.325 vs. 0.31 y/y. MRQ assets/equity at 3.292 vs. 3.432 y/y.
9. CNO Financial Group, Inc. (CNO): Engages in the development, marketing, and administration of health insurance, annuity, individual life insurance, and other insurance products for senior and middle-income markets in the United States. Market cap at $1.86B. Price at $7.89. PEG at 0.73. P/FCF at 2.66. MRQ net profit margin at 5.26% vs. 4.33% y/y. MRQ sales/assets at 0.034 vs. 0.033 y/y. MRQ assets/equity at 7.057 vs. 8.134 y/y.
10. AFLAC Inc. (AFL): Provides supplemental health and life insurance. Market cap at $19.94B. Price at $42.28. PEG at 0.76. P/FCF at 1.71. MRQ net profit margin at 12.58% vs. 7.6% y/y. MRQ sales/assets at 0.054 vs. 0.051 y/y. MRQ assets/equity at 8.47 vs. 9.548 y/y.
Accounting data sourced from Google Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.