Companies at the large cap level can be likened to ocean liners. They are some of the biggest ships on the water. Ships and companies of this size are not immune to changes in weather patterns and economic downturns, but most of them don't get thrown about as much as their smaller peers. They are built to endure. With this in mind, we searched for large cap stocks that appear to be trading below market value. In addition, all of the stocks have received recent analyst ratings of 'Buy' or 'Strong Buy.' We think you will find our list rather interesting.
The price/book value ratio is a great price-multiple valuation metric to find companies that could be potentially undervalued or overvalued. If a firm has a price/book value ratio of less than 1, it is stated to be trading below "break up" value. A lower P/BV Ratio can indicate a potentially mispriced company or indicate that something is fundamentally wrong with it.
The price/sales ratio is a price-multiple valuation metric used to help identify if a firm is cheap by its 12-month trailing sales numbers. In the most basic terms, it lets an investor know how much the investment community is willing to pay for every dollar's 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 dollar's 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.
We first looked for large cap stocks. Then we screened for businesses that are undervalued from a price-multiple valuation standpoint (P/BV<1)(P/S<1). Next, we screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We did not screen out any sectors.
Do you think these large-cap stocks failed to price their value accurately? Use this list as a starting-off point for your own analysis.
1) Sun Life Financial Inc. (SLF)
| Sector | Financial |
| Industry | Life Insurance |
| Market Cap | $13.82B |
| Beta | 1.67 |
Key Metrics
| Price/Book Value Ratio | 0.84 |
| Price/Sales Ratio | 0.61 |
| Analysts' Rating | 2.50 |
| Short Interest | 0.61% |
Sun Life Financial Inc., an international financial services organization, provides a range of protection and wealth accumulation products and services to individuals and corporate customers. Its Individual Insurance & Investments business unit offers insurance products, such as universal life, term life, permanent life, participating life, critical illness, long-term care, and personal health insurance; and savings and retirement products, which include accumulation annuities, guaranteed investment certificates, payout annuities, mutual funds, and segregated funds. The company's Group Benefits business unit provides life, dental, drug, extended health care, disability, and critical illness benefit programs to employers; and voluntary benefits, including post-employment life and health plans to individual plan members.
2) The Allstate Corporation (ALL)
| Sector | Financial |
| Industry | Property & Casualty Insurance |
| Market Cap | $19.06B |
| Beta | 1.44 |
Key Metrics
| Price/Book Value Ratio | 0.95 |
| Price/Sales Ratio | 0.58 |
| Analysts' Rating | 2.30 |
| Short Interest | 2.14% |
The Allstate Corporation, through its subsidiaries, engages in the personal property and casualty insurance, life insurance, and retirement and investment products business primarily in the United States. Its Allstate Protection segment sells private passenger auto and homeowner's insurance products to individuals under the Allstate, Encompass, and Esurance names through agencies, as well as directly through call centers and the Internet. This segment also provides commercial products for small business owners; specialty products, including motorcycle, boat, renters, and condominium insurance policies; insurance and non-insurance products primarily to auto dealers; and retail and wholesale roadside assistance products, as well as insurance agency services.
3) General Motors Company (GM)
| Sector | Consumer Goods |
| Industry | Auto Manufacturers - Major |
| Market Cap | $33.87B |
| Beta | - |
Key Metrics
| Price/Book Value Ratio | 0.83 |
| Price/Sales Ratio | 0.23 |
| Analysts' Rating | 1.90 |
| Short Interest | 7.21% |
General Motors Company designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide. The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Daewoo, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names. It also sells cars and trucks to dealers for consumer retail sales, as well as to fleet customers, including daily rental car companies, commercial fleet customers, leasing companies, and governments.
4) Hess Corporation (HES)
| Sector | Basic Materials |
| Industry | Oil & Gas Refining & Marketing |
| Market Cap | $17.24B |
| Beta | 1.21 |
Key Metrics
| Price/Book Value Ratio | 0.87 |
| Price/Sales Ratio | 0.47 |
| Analysts' Rating | 2.20 |
| Short Interest | 1.89% |
Hess Corporation, together with its subsidiaries, operates as an integrated energy company. The company operates in two segments, Exploration and Production (E&P) and Marketing and Refining (M&R). The E&P segment explores for, develops, produces, purchases, transports, and sells crude oil and natural gas.
5) Petroleo Brasileiro (PBR)
| Sector | Basic Materials |
| Industry | Oil & Gas Drilling & Exploration |
| Market Cap | $142.84B |
| Beta | 1.48 |
Key Metrics
| Price/Book Value Ratio | 0.77 |
| Price/Sales Ratio | 0.95 |
| Analysts' Rating | 2.40 |
| Short Interest | 0.23% |
Petroleo Brasileiro S.A., Petrobras, together with its subsidiaries, engages in the exploration, exploitation, and production of oil and gas, and energy in Brazil and internationally.
6) Valero Energy Corporation (VLO)
| Sector | Basic Materials |
| Industry | Oil & Gas Refining & Marketing |
| Market Cap | $16.44B |
| Beta | 1.46 |
Key Metrics
| Price/Book Value Ratio | 0.99 |
| Price/Sales Ratio | 0.12 |
| Analysts' Rating | 2.20 |
| Short Interest | 1.97% |
Valero Energy Corporation operates as an independent petroleum refining and marketing company. The company operates through three segments: Refining, Ethanol, and Retail. The Refining segment engages in refining, wholesale marketing, product supply and distribution, and transportation operations.
7) Manulife Financial Corporation (MFC)
| Sector | Financial |
| Industry | Life Insurance |
| Market Cap | $20.38B |
| Beta | 2.11 |
Key Metrics
| Price/Book Value Ratio | 0.79 |
| Price/Sales Ratio | 0.42 |
| Analysts' Rating | 2.40 |
| Short Interest | 0.37% |
Manulife Financial Corporation, together with its subsidiaries, provides financial protection and wealth management products and services to individuals and group customers primarily in Asia, Canada, and the United States. Its products and services include individual life insurance, group life and health insurance, long-term care services, pension products, annuities, mutual funds, and banking products. The company also offers retirement products to group benefit plans; reinsurance services, such as property and casualty retrocession; and asset management services to institutional customers.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on August 22, 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
