The market is trading sideways today after three days of an impressive rally albeit one on low volume. For myriad reasons I believe the next leg of the market is down. However, I also think we are in a trader's market that is probably range bound until we get some clarity on the European situation and worldwide growth. That being said, I am making a list of equities I want to deploy some cash into on the next significant pullback in the market. One stock that definitely makes the list is a cheap mining equipment manufacturer that has had a very challenging 2012 so far, but has brighter days ahead.
7 reasons JOY is a solid pick up at $56 a share:
- After falling for months on concerns about slowing worldwide growth, consensus estimates for FY2012 and FY2013 have stabilized over the past thirty days.
- JOY is oversold at just 7.3 times forward earnings, a sharp discount to its five year average (13.9).
- The stock price would have to rise 50% to match the median price target of $84 a share that the 15 analysts that cover the stock have on the shares.
- The stock is selling near the bottom of its five year valuation range based on P/E, P/S, P/B and P/CF.
- Joy Global has grown revenues and earnings at better than a 11% and 21% annual clip respectfully over the past five years yet the shares are selling at a five year projected PEG of just .41.
- Quarterly earnings estimates have come down some 10% over the past three months. Given this I think the company could significantly surprise on the upside when it reports at the end of August, much like heavy machinery brethren Caterpillar (CAT) did in late July.
- The stock looks like it has bottomed at current levels finally and is ready to move higher (See Chart)
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in JOY over the next 72 hours.