Whether or not you are a bargain hunter, finding a good deal brings a sense of satisfaction. Especially when you have done the homework and have confidence that your purchase is worth more. To find stocks that appear to be trading below their true value, we focused on the financial industry. We pulled together a list of companies that not only appear to be offered at discount, but they have EPS growth rates above 25% for the coming year. Review the summaries and graphs of financial stocks below to begin your research.
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.
The forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the earnings forecast instead. While this number might not be as accurate because it uses "forecast" 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 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 financial stocks. Next, we then screened for businesses that are trading at a discount (P/E<10) (forward P/E<10). We then screened for businesses that are considered high-growth, with 1-year projected EPS growth above 25%. We did not screen out any market caps.
Do you think these stocks hold value that has yet to be priced in? Use our list along with your own analysis.
1) Bank of America Corporation (BAC)
|Industry||Money Center Banks|
|Forward Price/Earnings Ratio||8.60|
|1-Year Projected Earnings Per Share Growth Rate||64.29%|
Bank of America Corporation, through its subsidiaries, provides various banking and financial products and services to individual consumers, small-and middle-market businesses, institutional investors, corporations, and governments in the United States and internationally. The company's Deposits segment provides traditional savings accounts, money market savings accounts, CDs and IRAs, and noninterest-and interest-bearing checking accounts, as well as investment accounts and products. Its Card Services segment issues credit and debit cards in the United States providing a range of lending products, including co-branded and affinity products. The company's Consumer Real Estate Services segment offers a line of consumer real estate products and services comprising fixed and adjustable-rate first-lien mortgage loans for home purchase and refinancing needs, home equity lines of credit, and home equity loans. Its Global Commercial Banking segment provides a range of lending-related products and services, integrated working capital management, and treasury solutions to business banking and middle-market companies, commercial real estate firms and governments.
The company's Global Banking & Markets segment offers advisory services, financing, securities clearing, settlement, and custody services to institutional investor clients; debt and equity underwriting and distribution; merger-related and other advisory services; and risk management products. Its Global Wealth & Investment Management segment provides brokerage, banking and retirement products; wealth structuring, investment management, trust and banking needs, and asset management services; and institutional and personal retirement solutions. As of May 12, 2012, the company served customers through a network of 5,700 banking centers, 17,750 ATMs, call centers, and online and mobile banking platforms. Bank of America Corporation was founded in 1874 and is based in Charlotte, North Carolina.
2) Phoenix Companies Inc. (PNX)
|Forward Price/Earnings Ratio||3.81|
|1-Year Projected Earnings Per Share Growth Rate||51.59%|
The Phoenix Companies, Inc., through its subsidiaries, provides life insurance and annuity products through independent agents and financial advisors in the United States. The company's life insurance products include whole life, universal life, and variable universal life products. Its annuity products comprise fixed indexed annuities, fixed annuities, single premium immediate annuities, and variable annuities. The company also offers dedicated life insurance and other consulting services to financial advisors in partner companies, as well as support for sales of its product line through independent distribution organizations. The Phoenix Companies, Inc. was founded in 1851 and its headquarters is in Hartford, Connecticut.
3) Knight Capital Group, Inc. (KCG)
|Industry||Investment Brokerage - Regional|
|Forward Price/Earnings Ratio||7.75|
|1-Year Projected Earnings Per Share Growth Rate||178.30%|
Knight Capital Group, Inc., a financial services company, provides access to the capital markets across multiple asset classes to buy-and sell-side firms and corporations, as well as offers capital markets services to corporate issuers and private companies primarily in the United States.
The company's Market Making segment engages in market making in global equities and listed domestic options. It primarily offers client and non-client electronic market making activities in equity securities quoted and traded on the exchanges, over-the-counter markets, and option markets. This segment's trading strategies also include exchange traded funds, options, futures and foreign exchange.
Its Institutional Sales and Trading segment offers a range of products and services and voice access to the global markets, including sales and trading for equities, exchange traded funds, options, and fixed income securities. This segment also engages in reverse mortgage origination and securitization, capital markets, and asset management activities. In addition, it facilitates client orders through program and block trades, and riskless principal trades, as well as provides capital markets services, including equity and debt private placement.
The company's Electronic Execution Services segment offers access to markets and self-directed trading via its electronic agency-based platforms. It operates the Knight Direct platform, which provides direct market access to U.S. and international equities, options, futures, foreign exchange, and commodities; electronic foreign exchange trading solutions to buy-side firms through a foreign exchange electronic communication networks; and electronic fixed income trading solutions to sell-side firms. The company was formerly known as Knight Trading Group, Inc. and changed its name to Knight Capital Group, Inc. in May 2005. Knight Capital Group, Inc. was founded in 1995 and its headquarters is in Jersey City, New Jersey.
4) UBS AG (UBS)
|Industry||Foreign Money Center Banks|
|Forward Price/Earnings Ratio||7.32|
|1-Year Projected Earnings Per Share Growth Rate||35.14%|
UBS AG, a financial services firm, provides wealth management, asset management, and investment banking products and services to private, corporate, and institutional clients worldwide. The company is also involved in retail and commercial banking in Switzerland. Its Wealth Management and Swiss Bank division provides financial services to high net worth individuals worldwide, as well as to private and corporate clients in Switzerland. This division offers financial advice, and products and tools for individual needs; and various banking services, such as deposits and lending.
The company's Wealth Management Americas division provides advice-based solutions to ultra high net worth and high net worth individuals, and families. This division operates domestic U.S. business, the domestic Canadian business, and international business booked in the United States. UBS AG's Global Asset Management division offers investment solutions to various asset classes comprising equities, fixed income, currency, hedge fund, real estate, infrastructure and private equity. This division also provides legal fund set-up, and accounting and reporting services for investment funds and alternative funds.
The company's Investment Bank division offers products and services in equities, fixed income, foreign exchange, and commodities to corporate and institutional clients, sovereign and government bodies, financial intermediaries, alternative asset managers, and its wealth management clients. This division engages in sales, trading and market-making activities across a range of securities; and provides advisory and analytics services in capital markets. UBS AG also offers treasury services. The company was founded in 1862 and its headquarters is in Zurich, Switzerland.
Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 08/31/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.