Seeking Alpha
Value, growth, long-term horizon, medium-term horizon
Profile| Send Message|
( followers)  

Do you prefer searching for stocks that appear to be undervalued? We ran a screen with this idea in mind.

We began by screening the large-cap sector for stocks that appear undervalued relative to earnings growth, with PEG below 1.

Then we screened that universe for those that appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.

It is based off of a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

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

click for interactive chart

Tool provided by Kapitall (www.kapitall.com).

Do you think these stocks are being undervalued? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by the Graham Number.

1. AFLAC Inc. (NYSE:AFL): Provides supplemental health and life insurance. Market cap at $21.49B, most recent closing price at $45.94. PEG at 0.76. Diluted TTM earnings per share at 5.48, and a MRQ book value per share value at 30.37, implies a Graham Number fair value = sqrt(22.5*5.48*30.37) = $61.19. Based on the stock's price at $44.58, this implies a potential upside of 37.27% from current levels.

2. Marathon Petroleum Corporation (NYSE:MPC): Engages in refining, transporting, and marketing petroleum products primarily in the United States and internationally. Market cap at $16.94B, most recent closing price at $49.96. PEG at 0.47. Diluted TTM earnings per share at 7, and a MRQ book value per share value at 27.11, implies a Graham Number fair value = sqrt(22.5*7*27.11) = $65.34. Based on the stock's price at $49.39, this implies a potential upside of 32.3% from current levels.

3. Baker Hughes Incorporated (NYSE:BHI): Supplies wellbore related products, and technology services and systems for drilling, formation evaluation, completion and production, and reservoir technology and consulting to the oil and natural gas industry worldwide. Market cap at $20.8B, most recent closing price at $47.66. PEG at 0.68. Diluted TTM earnings per share at 4.19, and a MRQ book value per share value at 37.69, implies a Graham Number fair value = sqrt(22.5*4.19*37.69) = $59.61. Based on the stock's price at $46.98, this implies a potential upside of 26.88% from current levels.

4. Johnson Controls Inc. (NYSE:JCI): Engages in building efficiency, automotive experience, and power solutions businesses worldwide. Market cap at $18.47B, most recent closing price at $27.46. PEG at 0.62. Diluted TTM earnings per share at 2.51, and a MRQ book value per share value at 16.95, implies a Graham Number fair value = sqrt(22.5*2.51*16.95) = $30.94. Based on the stock's price at $24.59, this implies a potential upside of 25.82% from current levels.

*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.

Source: 4 Large-Caps Undervalued By Earnings Growth And The Graham Number