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By Matt Doiron

Value stocks are traditionally defined as companies with fairly low price-to-earnings or price-book ratios, with P/E ratios generally being more meaningful for services or technology businesses. One limitation of these ratios is that they are based on past performance of a company, and not the potential for its earnings to grow in the future (or even hold steady). If investors want a more complete picture of a company, they can either analyze the business themselves and project the path of its earnings or use estimates from Wall Street analysts - at least as a general guide for finding businesses selling at good prices that have the potential for strong growth as well.

Using data from Fidelity, here are four stocks trading at less than 20 times trailing earnings that sell-side analysts project will at least double their earnings per share next year compared to earnings per share this year:

Company

P/E (trailing earnings)

Projected EPS Growth

Morgan Stanley (NYSE:MS)

10.7

+118%

Forest Laboratories (NYSE:FRX)

11.7

+128%

Penn West Petroleum (NYSE:PWE)

16.1

+330%

Chesapeake Energy (NYSE:CHK)

7.7

+309%

Morgan Stanley has taken a PR hit from the poor performance of the Facebook (NASDAQ:FB) IPO that it served as the lead underwriter for - year to date the stock is down 16% - but sell-side analysts are confident that their fellow bank will recover. The company trades at ten times last year's earnings, but is expected to double its earnings per share next year, and if it meets these expectations, the P/E ratio should also rise as investors gain more confidence in the stock. We asked if Morgan Stanley was a good stock to buy earlier last week, noting its attempts to cost costs.

Forest Laboratories is a drug manufacturer which, among other products, sells treatments for Alzheimer's and hypertension. Carl Icahn is currently engaged in a furious battle with Forest's management (read Icahn's recent letter to the Board of Directors) as he attempts to gain more control over the company. The stock is down about 9% over the last year and is in value territory, with sell-side analysts predicting that it will double earnings per share next year.

Penn West Petroleum is involved with oil and gas exploration and production in Canada and the northern United States. The stock price has fallen by a third this year despite the company crushing earnings estimates and paying substantial dividends on a historical basis. Sell-side analysts have recently downgraded the stock, saying they believe that the company needs to raise cash in the near future to pay off debt and may need to sell some assets. This potential cash crunch has pulled the stock away from the fundamental value of its assets and future cash flows. First Eagle Investment Management owned 19 million shares of the stock at the end of March.

Finally, Chesapeake has been in the news quite a bit this year. The company's management and transparency practices were called into question, and as the share price declined, short sellers began to argue that the company would not be able to generate enough cash to break even this year, which would force it to sell valuable assets at a discount. Carl Icahn bought into the stock after it sharply declined, and the well-known activist investor was able to restore at least some confidence in the company in the financial markets. Chesapeake's natural gas operations are a hot industry and analysts think that earnings per share could quadruple next year. It could be a good pick for a high-risk, high-reward investor.

Source: 4 Undervalued Stocks Expected To Double EPS Next Year