5 Undervalued And Oversold Stocks With Strong Sources Of Profitability

by: Kapitall

Do you like to look for stocks that may be trading at a discount? If so, here's a list you may find interesting.

We began by screening for stocks that are technically oversold, with Relative Strength Index readings over the last 14 days below 40. We then screened for those that appear undervalued relative to earnings growth, with PEG below 1.

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. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall. More investing ideas on Kapitall Wire.

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. Beasley Broadcast Group Inc. (BBGI): Engages in acquiring, developing, and operating radio stations in the United States. Market cap at $114.51M, most recent closing price at $4.91. PEG at 0.36. RSI(14) at 31.67. MRQ net profit margin at 10.34% vs. 6.72% y/y. MRQ sales/assets at 0.091 vs. 0.091 y/y. MRQ assets/equity at 3.358 vs. 3.933 y/y.

2. Express Inc. (EXPR): Operates specialty retail stores in the United States. Market cap at $1.44B, most recent closing price at $16.15. PEG at 0.56. RSI(14) at 34.5. 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.

3. Resources Connection Inc. (RECN): Provides professional services in provides finance, accounting, risk management and internal audit, corporate advisory, strategic communications and restructuring, information management, human capital, supply chain management, actuarial, and legal and regulatory services in support of client-led projects and initiatives. Market cap at $474.07M, most recent closing price at $11.23. PEG at 0.56. RSI(14) at 36.83. MRQ net profit margin at 6.11% vs. 3.71% y/y. MRQ sales/assets at 0.338 vs. 0.306 y/y. MRQ assets/equity at 1.177 vs. 1.278 y/y.

4. Dice Holdings, Inc. (DHX): Provides online recruiting and career development services. Market cap at $485.27M, most recent closing price at $7.63. PEG at 0.71. RSI(14) at 36.29. MRQ net profit margin at 19.5% vs. 17.25% y/y. MRQ sales/assets at 0.152 vs. 0.134 y/y. MRQ assets/equity at 1.607 vs. 1.615 y/y.

5. Ingram Micro Inc. (IM): Distributes information technology (IT) products and supply chain solutions worldwide. Market cap at $2.28B, most recent closing price at $14.91. PEG at 0.84. RSI(14) at 22.76. MRQ net profit margin at 0.7% vs. 0.68% y/y. MRQ sales/assets at 1.003 vs. 0.981 y/y. MRQ assets/equity at 2.591 vs. 2.608 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.