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Do you prefer searching for stocks that appear to be trading below their fair value? If so you may identify with the term value investor. We ran a screen keeping this idea in mind.

We began by screening for stocks trading under $5 a share that appear undervalued relative to earnings growth, with PEG below 1.

We then screened for strong sales trends by comparing growth in revenue to growth in inventory over the last year. We screened for stocks with positive sales trends, with faster growth in revenue than inventory over the last year. Since inventory represents the portion of goods not yet sold, faster growth in revenue than inventory is considered an encouraging sign.

To screen for strengthening liquidity, we also only focused on those companies with inventory decreasing as a percent of current assets.

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

Tool provided by Kapitall (kapitall.com).

Do you think these stocks are trading below their fair value? Use this list as a starting point for your own analysis.

List sorted by increase in revenue over the last year.

1. Xinyuan Real Estate Co., Ltd. (XIN): Engages in residential real estate development in China. Market cap at $199.83M. Price at $2.78. PEG at 0.36. Revenue grew by 88.04% during the most recent quarter ($172.58M vs. $91.78M y/y). Inventory grew by 4.77% during the same time period ($711.95M vs. $679.56M y/y). Inventory, as a percentage of current assets, decreased from 60.81% to 53.25% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).

2. TravelCenters of America LLC (TA): Operates and franchises travel centers primarily along the United States interstate highway system. Market cap at $144.71M. Price at $4.95. PEG at 0.4. Revenue grew by 11.94% during the most recent quarter ($1,994.87M vs. $1,782.11M y/y). Inventory grew by 8.75% during the same time period ($165.02M vs. $151.74M y/y). Inventory, as a percentage of current assets, decreased from 36.83% to 33.5% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).

3. Exide Technologies (XIDE): Engages in the manufacture and supply of lead-acid batteries for the transportation and industrial energy applications. Market cap at $278.14M. Price at $3.47. PEG at 0.39. Revenue grew by 1.03% during the most recent quarter ($782.55M vs. $774.55M y/y). Inventory grew by -7.78% during the same time period ($479.47M vs. $519.91M y/y). Inventory, as a percentage of current assets, decreased from 41.8% to 40.36% during the most recent quarter (comparing 3 months ending 2012-03-31 to 3 months ending 2011-03-31).

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Source: 3 Undervalued Stocks Under $5 With Strong Sales Trends