6 Undervalued Basic Materials Stocks With Impressive Growth Projections

by: ZetaKap

When it comes to investments, positive growth trends make for an attractive stock. But when you are interested in upping the ante, it makes sense to look for stocks that have more going for them beyond sizeable growth predictions. Today we gathered a list of stocks in the basic materials sector that have EPS growth rates above 25% for the coming year and also appear to be trading below value. With these types of growth trends, it is likely that the stock will not remain undervalued for long, which will mean gains for the investor. We think you will find our list worthy of further research.

The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses "forecasted" numbers, it does offer the benefit of illustrating analysts' expectations of a firm. If the market believes that earnings will grow moving forward, then the forward P/E should be lower than the current P/E. Financial Leverage, also known as the Equity Multiplier, illustrates how a firm is financing its assets. The lower the number the more a firm is financing its assets internally through stockholder equity. The higher this metric is the more the firm is relying on debt to finance its assets.

The Price/Sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its twelve month trailing sales numbers. In the most basic terms it let's an investor know how much the investment community is willing to pay for every dollars worth of sales. A firm with a P/S ratio of one or lower would be viewed as cheap because investors are paying $1 or less for every dollars worth of a firm's sales. On the other hand, a firm is generally considered to be expensive when the P/S ratio is above three. These are general guidelines used by the investment community not hard rules to be clear. Price/Sales Ratio = Current Stock Price/Revenue (sales) per Share

EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS Growth Rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.

We first looked for basic materials stocks. We next screened for businesses with a low price-multiple premium (forward P/E<10)(P/S<1). We next screened for businesses with projected high growth, measured by 1-year projected EPS growth above 25%. We did not screen out any market caps.

Do you think these stocks can offer attractive returns? Use this list as a starting-off point for your own analysis.

1) Universal Stainless & Alloy Products Inc. (NASDAQ:USAP)

Sector Basic Materials
Industry Steel & Iron
Market Cap $255.59M
Beta 2.32

USAP stock chart


Forward Price/Earnings Ratio 8.66
Price/Sales Ratio 0.94
1-Year Projected Earnings Per Share Growth Rate 58.30%
Short Interest 7.05%

Universal Stainless & Alloy Products, Inc., together with its subsidiaries, engages in the manufacture and marketing of semi-finished and finished specialty steels in the United States. It offers stainless steel, tool steel, and other alloyed steels. The company produces specialty steel products in the form of long products, including ingots, blooms, billets, and bars; and flat rolled products, such as slabs and plates.

2) Renewable Energy Group, Inc. (NASDAQ:REGI)

Sector Basic Materials
Industry Oil & Gas Refining & Marketing
Market Cap $186.18M
Beta -

REGI stock chart


Forward Price/Earnings Ratio 9.10
Price/Sales Ratio 0.19
1-Year Projected Earnings Per Share Growth Rate 60.60%
Short Interest 5.50%

Renewable Energy Group, Inc. produces and markets biodiesel primarily in the United States and Canada. It is also involved in purchasing and reselling biodiesel and raw material feed stocks produced by third parties; providing toll manufacturing services to third parties; and selling glycerin, free fatty acids, and other co-products of the biodiesel production process. In addition, the company offers biodiesel facility management and operational services to biodiesel production facilities, as well as other clean-tech companies; and construction management and general contractor services for the construction of biodiesel production facilities.

3) Commercial Metals Company (NYSE:CMC)

Sector Basic Materials
Industry Steel & Iron
Market Cap $1.60B
Beta 1.51

CMC stock chart


Forward Price/Earnings Ratio 9.19
Price/Sales Ratio 0.20
1-Year Projected Earnings Per Share Growth Rate 53.06%
Short Interest 2.06%

Commercial Metals Company engages in recycling, manufacturing, fabricating, and distributing steel and metal products, and related materials and services in the United States and internationally. The company processes scrap metals for use as a raw material by manufacturers of new metal products through 33 scrap metal processing facilities to steel mills and foundries, aluminum sheet and ingot manufacturers, brass and bronze ingot makers, copper refineries and mills, secondary lead smelters, specialty steel mills, high temperature alloy manufacturers, and other consumers. It also operates five steel mills producing reinforcing bars, angles, flats, rounds, small beams, fence-post sections, and other shapes; a scrap metal shredder processing facility; a railroad salvage business; and a copper tube minimill.

4) Materion Corporation (NYSE:MTRN)

Sector Basic Materials
Industry Industrial Metals & Minerals
Market Cap $420.25M
Beta 2.01

MTRN stock chart


Forward Price/Earnings Ratio 9.98
Price/Sales Ratio 0.30
1-Year Projected Earnings Per Share Growth Rate 36.42%
Short Interest 7.65%

Materion Corporation, through its subsidiaries, produces and sells engineered materials for use in various electrical, electronic, thermal, and structural applications primarily in the United States, Europe, and Asia. It offers precious, non-precious, and specialty metal products, including vapor deposition targets, frame lid assemblies, clad and precious metal preforms, high temperature braze materials, wires, chemicals, optics, performance coatings, microelectronic packages, and specialty inorganic materials. The company also provides various strip products, such as thin gauge precision strips, and thin diameter rods and wires for use as connectors, contacts, switches, relays, and shielding; and bulk products comprising copper and nickel-based alloys in plate, rod, bar, tube, and other customized forms that are used in oil and gas drilling components, bearings, bushings, welding rods, plastic mold tooling, and undersea telecommunications housing equipment.


Sector Basic Materials
Industry Steel & Iron
Market Cap $29.64B
Beta 1.64

PKX stock chart


Forward Price/Earnings Ratio 9.83
Price/Sales Ratio 0.49
1-Year Projected Earnings Per Share Growth Rate 29.30%
Short Interest 0.28%

POSCO engages in the manufacture and sale of steel products in Korea and internationally. It offers hot rolled steel for general structures, gas cylinders, hull structures, automobile structural uses, and machine structures; atmospheric corrosion resistant steel; steel for casting and tubing of oilwell pipes; steel for line pipes; and general machine structural steel, alloy steel, and steel for tools and machine parts, as well as steel for ships. The company also provides cold rolled, galvanized, electrical, and stainless steel products, as well as titanium products.

6) TGC Industries Inc. (NASDAQ:TGE)

Sector Basic Materials
Industry Oil & Gas Equipment & Services
Market Cap $141.85M
Beta 1.93

TGE stock chart


Forward Price/Earnings Ratio 9.13
Price/Sales Ratio 0.84
1-Year Projected Earnings Per Share Growth Rate 28.90%
Short Interest 4.84%

TGC Industries, Inc. provides geophysical services for clients in the oil and gas business in the United States and Canada. It conducts three-dimensional surveys and provides seismic data acquisition services primarily to onshore oil and natural gas exploration and development companies for use in the onshore drilling and production of oil and natural gas. The company also owns a data bank, which contains gravity data and magnetic data from various oil and natural gas producing areas located in the United States.

*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/20/2012.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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