Some investments are slow and steady. It can take time and patience to reap the benefits. Other investments can provide faster returns, but may come with higher stakes. For those times that you want an investment to produce gains at a quicker pace, one consideration is looking for stocks that appear to be trading at a discount while projected for growth in the coming year. The premise with this combination is that if the stocks achieve their projected growth, they will rise in value and produce gains for the investor. With that in mind, we scanned the basic materials sector for stocks that have EPS growth projections above 25% for the next year and appear to be undervalued. Take a look at the summaries and graphs below to begin your own investigation.
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.
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
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.
We first looked for basic materials stocks. We next screened for businesses that have expected earnings per share growth of more than 25 percent for next year(1-year projected EPS Growth Rate>25%). Next, we then screened for businesses that are trading at a discount (P/S<1)(P/BV<1). We did not screen out any market caps.
Do you think these stocks should be trading higher? Use our list to help with your own analysis.
1) Great Basin Gold Ltd. (NYSEMKT:GBG)
|1-Year Projected Earnings Per Share Growth Rate||500.00%|
|Price/Book Value Ratio||0.24|
Great Basin Gold Ltd., a mineral exploration and development company, engages in the acquisition, exploration, and development of precious metal deposits. The company has two primary projects, including the Hollister gold project comprising a total of 950 unpatented, federal mining claims, covering approximately 69 square kilometers located in Ivanhoe Mining District, Elko County, Nevada; and the Burnstone gold mine consisting of mineral rights covering approximately 35,000 hectares situated in the Witwatersrand Basin goldfields in South Africa. It also owns mineral properties in Tanzania and Mozambique. Great Basin Gold Ltd. was founded in 1986 and is headquartered in Sandton, South Africa.
2) Century Aluminum Co. (NASDAQ:CENX)
|1-Year Projected Earnings Per Share Growth Rate||182.20%|
|Price/Book Value Ratio||0.54|
Century Aluminum Company, through its subsidiaries, produces primary aluminum in the United States, China, and Iceland. The company offers high purity primary aluminum, molten aluminum, standard-grade ingots, extrusion billets, and other value-added primary aluminum products. It also holds a 40% joint venture interest in a carbon anode and cathode facility located in the Guangxi Zhuang Autonomous Region of south China. The company was founded in 1981 and is headquartered in Monterey, California.
3) Alcoa, Inc. (NYSE:AA)
|1-Year Projected Earnings Per Share Growth Rate||155.17%|
|Price/Book Value Ratio||0.67|
Alcoa, Inc. engages in the production and management of primary aluminum, fabricated aluminum, and alumina. The company operates in four segments: Alumina, Primary Metals, Flat-Rolled Products, and Engineered Products and Solutions. The Alumina segment engages in mining of bauxite, which is then refined into alumina. The Primary Metals segment produces aluminum. The Flat-Rolled Products segment engages in the production and sale of aluminum plate, sheet, and foil.
The Engineered Products and Solutions segment produces and sells titanium, aluminum, and super alloy investment castings, hard alloy extrusions, forgings and fasteners, aluminum wheels, integrated aluminum structural systems, and architectural extrusions. Its products are used in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, consumer electronics, and industrial applications. The company holds interests in bauxite mining activities. The company has operations primarily in the United States, Australia, Spain, Brazil, the Netherlands, Norway, France, the Russian Federation, Hungary, Italy, the United Kingdom, China, and Germany. Alcoa, Inc. was founded in 1888 and is based in New York, New York.
4) Green Plains Renewable Energy, Inc. (NASDAQ:GPRE)
|1-Year Projected Earnings Per Share Growth Rate||174.40%|
|Price/Book Value Ratio||0.30|
Green Plains Renewable Energy, Inc. engages in the production, marketing, and distribution of ethanol, distillers grains, and corn oil in the United States. It is also involved in owning and operating grain handling and storage assets; providing agronomy services that comprise selling fertilizer and other agricultural inputs, and providing application services to local grain producers; selling petroleum products, including diesel, soydiesel, blended gasoline, and propane, primarily to agricultural producers and consumers; and the marketing and distribution of company-produced and third-party ethanol, distillers grains, and corn oil. The company was founded in 2006 and is headquartered in Omaha, Nebraska.
5) Aluminum Corporation Of China Limited (NYSE:ACH)
|1-Year Projected Earnings Per Share Growth Rate||340.00%|
|Price/Book Value Ratio||0.68|
Aluminum Corporation of China Limited engages in the manufacture and distribution of alumina, primary aluminum, and aluminum fabrication products in the People's Republic of China and internationally. Its Alumina segment is involved in the mining and purchasing of bauxite and other raw materials, refining of bauxite into alumina, and sale of alumina. This segment also produces and sells chemical alumina, including alumina hydroxide and alumina chemicals, and metal gallium. The company's Primary Aluminum segment engages in smelting alumina to produce primary aluminum, principally ingots for use in general aluminum fabrication in the construction, power generation, automobile, packaging, machinery, and durable goods industries. This segment also produces and sells carbon products, aluminum alloy, and other aluminum products.
Aluminum Corporation of China Limited's Aluminum Fabrication segment is involved in the production and sale of aluminum fabrication products, including casts, planks, strips, screens, extrusions, ingots and profiles, forges, powder, and die castings for use in the construction, power generation, automobile, packaging, machinery, and durable goods industries. Its Trading segment engages in the procurement and sale of alumina, primary aluminum, and aluminum fabrication products, as well as other non-ferrous metal products, and raw and ancillary materials. The company also engages in the manufacture and distribution of metal materials; sale of general machinery and equipment; production, acquisition, and distribution of limestone ore, aluminum magnesium ore, and related nonferrous metal products; aluminum smelting, manufacture, and distribution of nonferrous metals; and generation and supply of electricity, as well as in iron ore mining and coal mining activities. Aluminum Corporation of China Limited was founded in 2001 and is based in Beijing, the People's Republic of China.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/03/2012.