It takes a practiced eye and investor to interpret when the timing is right for purchasing stocks that appear to be undervalued. Each stock presents a different pattern of highs and lows, and while there can be general similarities across the board, it always is important to review the fundamentals of each company. For our list today, we focused on finding industrial stocks that appear to be trading at a discount. In addition, these stocks have received recent "Buy" ratings from industry analysts. Take a look at the summaries and graphs below to begin your own analysis.
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 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. To be clear, these are general guidelines used by the investment community, not hard rules.
Price/Sales Ratio = Current Stock Price/Revenue (Sales) per Share
The Price/Earnings ratio is one of the most commonly used price-multiple metrics. Often, EPS from the last four quarters is used to derive this number. A firm that has a high P/E ratio generally indicates that investors have high expectations of the firm relative to future earnings growth. By the opposite token, investors generally have lower expectations of a firm with a low P/E ratio. A firm that holds a P/E below 10 could be viewed as having "value investment" potential. One thing to remember is that EPS is an accounting measure that could be potentially manipulated. Thus the P/E is only as good as the quality of the earnings.
We first looked for industrial stocks. We then looked for businesses that are trading at a discount (P/S<1)(P/E<10). We then screened for businesses that analysts rate as "Buy" (2 < mean recommendation < 3). We did not screen out any market caps.
Do you think these stocks offer both value and growth? Use our screened list as a starting point for your own analysis.
1) General Dynamics Corp. (GD)
|Industry||Aerospace/Defense Products & Services|
General Dynamics Corporation, an aerospace and defense company, provides business aviation; combat vehicles, weapons systems, and munitions; military and commercial shipbuilding; and communications and information technology products and services worldwide. Its Aerospace group designs, manufactures, and outfits various large and mid-cabin business-jet aircraft; provides maintenance, repair work, fixed-based operations, and aircraft management services; and performs aircraft completions for aircraft. The company's Combat Systems group offers tracked and wheeled military vehicles, weapons systems, and munitions. Its product lines include wheeled combat and tactical vehicles; battle tanks and infantry vehicles; munitions and propellant; rockets and gun systems; and axle and drivetrain components and aftermarket parts. This group also manufactures and supplies engineered axles, suspensions, and brakes for heavy-load vehicles for military and commercial customers. The company's Marine System group designs, builds, and supports submarines and surface ships for the U.S. Navy; and Jones Act ships for commercial customers. This group offers nuclear-powered submarines, surface combatants, and auxiliary and commercial ships; and provides design and engineering support services, as well as ship and submarine overhaul, repair, and lifecycle support services. Its Information Systems and Technology group provides technologies, products, and services that support a range of government and commercial communication and information-sharing needs, including communications systems, command-and-control systems, and operational hardware; information technology services; and intelligence, surveillance, reconnaissance, and tactical communication systems to the U.S. defense, intelligence and homeland security communities, the U.S. allies, and commercial and international customers. General Dynamics Corporation was founded in 1899 and is based in Falls Church, Virginia.
2) Columbus McKinnon Corporation (CMCO)
|Industry||Farm & Construction Machinery|
Columbus McKinnon Corporation designs, manufactures, and markets material handling products and services for various commercial and industrial end-user markets in the United States, Europe, Canada, and internationally. The company offers electric, lever, hand, and air-powered hoists; hoist trolleys; winches; industrial crane systems, such as bridge, gantry, and jib cranes; alloy and carbon steel closed-die forged attachments, including hooks, shackles, hitch pins, and master links; and closed-die forged attachments comprising hooks, shackles, textile slings, clamps, logging tools, and load binders. It also provides industrial components consisting of mechanical and electromechanical actuators and rotary unions; below-the-hook special purpose lifters; clamps; textile strappings; tire shredders; and light-rail systems. The company offers its products through commercial distributors and end-users under the Budgit, Chester, CM, Coffing, Duff-Norton, Little Mule, Pfaff, Shaw-Box, Yale, and Herc-Alloy brand names. It sells its products to various industries, which include manufacturing, power generation and distribution, utilities, wind power, warehouses, commercial construction, oil exploration and refining, petrochemical, marine, ship building, transportation and heavy duty trucking, agriculture, logging, and mining, as well as to the entertainment industry comprising permanent and traveling concerts, live theater, and sporting venues. Columbus McKinnon Corporation was founded in 1875 and is headquartered in Amherst, New York.
3) AAR Corp. (AIR)
|Industry||Aerospace/Defense Products & Services|
AAR CORP. provides products and services to aviation, government, and defense markets worldwide. The company's Aviation Supply Chain segment engages in the purchase, sale, lease, repair, and overhaul of new, overhauled, and repaired engine and airframe parts and components; and avionics, electrical, electronic, fuel, hydraulic, and pneumatic components and instruments, as well as provides customized inventory supply and management programs for engine and airframe parts and components. It also sells and leases used commercial aircraft. As of May 31, 2012, this segment had ownership interests in 18 aircraft. AAR CORP.'s Government and Defense Services segment engages in fixed-and rotary-wing flight operations, transporting personnel and cargo, as well as performing engineering and design modifications on rotary-wing aircraft for government customers. This segment also provides customized performance-based logistics programs in support of the U.S. Department of Defense and foreign governments; and engineering, design, and system integration services for specialized command and control systems. The company's Maintenance, Repair, and Overhaul segment provides airframe maintenance inspection and overhaul, painting, line maintenance, airframe modification, structural repair, avionic service and installation, exterior and interior refurbishment, and engineering services, as well as support for commercial and military aircraft; and repair and overhaul for landing gears, wheels, brakes, and actuators. AAR CORP.'s Structures and Systems segment designs, manufactures, and repairs airdrop and other transportation pallets, and containers and shelters used in support of military and humanitarian tactical deployment activities; and designs, manufactures, and installs in-plane cargo loading and handling systems for commercial and military aircraft and helicopters. The company was founded in 1951 and is headquartered in Wood Dale, Illinois.
4) CNH Global NV (CNH)
|Industry||Farm & Construction Machinery|
CNH Global N.V. manufactures, markets, and distributes a line of agricultural and construction equipment and parts worldwide. It operates in three segments: Agricultural Equipment, Construction Equipment, and Financial Services. The Agricultural Equipment segment provides tractors, combine harvesters, hay and forage equipment, seeding and planting equipment, tillage equipment, and sprayers, as well as cotton picker packagers, and sugar cane and grape harvesters primarily under the Case IH and New Holland brands. The Construction Equipment segment offers heavy construction equipment, such as crawler and wheeled excavators, wheel loaders, graders, dozers, and articulated haul trucks; and light construction equipment, including backhoe loaders, skid steer and tracked loaders, mini and midi excavators, compact wheel loaders, and telehandlers primarily under the Case and New Holland Construction brands. This segment serves construction companies, municipalities, local governments, rental fleet owners, quarrying and aggregate mining companies, waste management companies, forestry-related concerns, contractors, residential builders, utilities, road construction companies, landscapers, logistics companies, and farmers. The Financial Services segment provides financial products and services, including retail financing for the purchase or lease of the company's and other manufacturers' new and used products; and facilitates the sale of insurance products and other financing programs to retail customers. This segment also offers wholesale financing to its dealers and rental equipment operators, as well as financing options to dealers to finance working capital, real estate, and other fixed assets and maintenance equipment. CNH Global N.V. sells and distributes its products through dealers and distributors in approximately 170 countries. The company was founded in 1991 and is based in Amsterdam, the Netherlands. CNH Global N.V. is a subsidiary of Fiat Netherlands Holding N.V.
5) NN Inc. (NNBR)
|Industry||Machine Tools & Accessories|
NN, Inc. engages in the manufacture and sale of metal bearing, plastic and rubber, and precision metal components for bearing manufacturers worldwide. It operates in three segments: Metal Bearing Components, Plastic and Rubber Components, and Precision Metal Components. The Metal Bearing Components segment manufactures precision steel balls that are used primarily by manufacturers of anti-friction bearings; steel rollers comprising tapered rollers used in automotive gearbox applications, automotive wheel bearings, and various industrial applications; cylindrical rollers; and precision metal retainers for roller bearings. The Plastic and Rubber Components segment offers precision bearing seals for use in the automotive, industrial, agricultural, and mining markets; precision plastic retainers for ball and roller bearings used in various industrial applications; and precision plastic components, including automotive under-the-hood components, electronic instrument cases, precision electronic connectors and lenses, and various specialized industrial and consumer parts. The Precision Metal Components segment provides engineered shafts, fluid power assemblies, and complex precision assembled and tested parts used in the automotive, HVAC, fluid power, and diesel engine markets. The company was founded in 1980 and is based in Johnson City, Tennessee.
6) Twin Disc Inc. (TWIN)
Twin Disc, Incorporated engages in the design, manufacture, and sale of marine and heavy duty off-highway power transmission equipment. The company's product portfolio includes marine transmissions, surface drives, propellers, and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches, and controls systems. It sells its products to customers primarily in the pleasure craft, commercial, and military marine markets, as well as in the energy and natural resources, government, and industrial markets through direct sales force and distributor networks worldwide. Twin Disc, Incorporated was founded in 1918 and is headquartered in Racine, Wisconsin.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/28/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.