While there are times when it is nice to splurge on a slightly overpriced item, most people prefer paying a fair or even discounted price. Especially when it comes to investments. After all, the intention is to make more money. With this in mind, we scanned the basic materials sector for stocks that appear to be trading below their true value and are on track for growth. All of the stocks in our list today have EPS growth rates above 25% for the coming year. If these companies achieve their growth projections it will mean gains for the investor. We think you will like the list of basic materials stocks we developed for your review.
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 PEG ratio (price/earnings to growth ratio) is a valuation metric for determining the relative trade-off between the price of a stock, the earnings generated per share [EPS], and the company's expected growth. In general, the P/E ratio is higher for a company with a higher growth rate. Thus using just the P/E ratio would make high-growth companies appear overvalued relative to others. It is assumed that by dividing the P/E ratio by the earnings growth rate, the resulting ratio is better for comparing companies with different growth rates. A lower ratio is 'better' (cheaper) and a higher ratio is 'worse' (expensive) - a PEG ratio of 1 means the company is fairly priced.
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 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 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
We first looked for basic materials stocks. From here, we then looked for companies with estimated high-growth, with 1-year projected EPS growth above 25%. We then screened for businesses that are trading at a discount when considering the company growth rate (PEG Ratio < 1)(P/S<1). We did not screen out any market caps.
Do you think these stocks will offer healthy returns? Use our screened list as a starting point for your own analysis.
1) First Majestic Silver Corp. (NYSE:AG)
|1-Year Projected Earnings Per Share Growth Rate||64.21%|
|Price/Earnings to Growth Ratio||0.51|
First Majestic Silver Corp. engages in the acquisition, development, and exploration of mineral properties with a focus on silver projects in Mexico. It owns interests in the La Encantada Silver Mine consisting of 22 mining concessions covering 6,327 hectares in the state of Coahuila, Mexico; the La Parrilla Silver Mine comprising 39 contiguous mining concessions that provide mineral rights covering 69,460 hectares in La Parrilla mining district of Durango state; and the San Martin Silver Mine covering mineral rights for 7,841 hectares in Jalisco State, Mexico. It also holds interests in the Del Toro Silver Mine consisting of 21 contiguous mining concessions in the Chalchihuites mining district that cover mineral rights for 368 hectares; and the La Luz property located in the San Luis Potos state of Mexico. In addition, it has an interest in certain exploration properties in Jalisco State, Mexico. The company was founded in 1979 and is based in Vancouver, Canada.
2) Chemtura Corporation (NYSE:CHMT)
|1-Year Projected Earnings Per Share Growth Rate||27.27%|
|Price/Earnings to Growth Ratio||0.62|
Chemtura Corporation, together with its subsidiaries, engages in the manufacture and sale of specialty chemical solutions and consumer products worldwide. The company's Consumer Products segment provides recreational water purification products, such as sanitizers, algaecides, biocides, oxidizers, pH balancers, mineral balancers, and other specialty chemicals and accessories; and specialty and multi-purpose cleaners. Its Industrial Performance Products segment products include petroleum additives that offer detergency, friction modification, and corrosion protection in automotive lubricants, greases, refrigeration, and turbine lubricants; castable urethane prepolymers, which provide abrasion resistance and durability; and polyurethane dispersions and urethane prepolymers used in various coatings.
This segment also offers plastic antioxidants additives that inhibit the degradation of polymers caused by air and heat during manufacture and use; UV stabilizers additives for protecting materials against ultra-violet light; and rubber additives products, which protect elastomers and rubber compounds. The company's Chemtura AgroSolutions segment produces seed treatments, fungicides, miticides, insecticides, growth regulants, and herbicides. Its Industrial Engineered Products segment offers flame retardants, bromine and bromine intermediates, catalyst components, fumigants, and surface treatments and completion fluids for oil and gas extraction.
The company has a strategic alliance with Isagro S.p.A. It serves various industries, such as agriculture, automotive, building and construction, electronics, lubricants, packaging, plastics, pool and spa chemicals, and transportation. Chemtura Corporation was founded in 1900 and is based in Middlebury, Connecticut.
3) Noranda Aluminum Holding Corp. (NOR)
|1-Year Projected Earnings Per Share Growth Rate||268.18%|
|Price/Earnings to Growth Ratio||0.65|
Noranda Aluminum Holding Corporation engages in the production and sale of primary aluminum products and rolled aluminum coils in the United States. It mines, produces, and sells bauxite used for alumina production. The company refines and converts bauxite into alumina; and smelts and produces primary aluminum products in various forms, including billet, rod, high purity sow, and foundry ingot, as well as commodity grade sow. These products are used in building construction, architectural, transportation, electrical, and steel de-oxidation applications.
In addition, it produces aluminum rolled products comprising heavy gauge foil products, including finstock and semi-rigid container stock, and light gauge converter foils used for packaging applications; and consumer foils and light gauge sheet products, such as transformer windings and building products. Noranda Aluminum Holding Corporation primarily sells its products to original equipment manufacturers of air conditioners, transformers, semi-rigid containers, and foil packaging industries; and other metals end-users. The company was founded in 2007 and is headquartered in Franklin, Tennessee.
4) Aceto Corp. (NASDAQ:ACET)
|Industry||Chemicals - Major Diversified|
|1-Year Projected Earnings Per Share Growth Rate||30.77%|
|Price/Earnings to Growth Ratio||0.66|
Aceto Corporation engages in the sourcing, regulatory support, marketing, and distribution of pharmaceutical intermediates and active ingredients, finished dosage form generics, nutraceutical products, agricultural protection products, and specialty chemicals worldwide. The company operates in three segments: Health Sciences, Specialty Chemicals, and Agricultural Protection Products. The Health Sciences segment supplies raw materials used in the production of nutritional and packaged dietary supplements, including vitamins, amino acids, iron compounds, and bio chemicals used in pharmaceutical and nutritional preparations.
The Specialty Chemicals segment provides various chemicals used in plastics, surface coatings, textiles, fuels, and lubricants; organic intermediates used in the production of agrochemicals; and dye and pigment intermediates used in the color-producing industries, such as textiles, inks, paper, and coatings. This segment also offers diazos and couplers to the paper, film, and electronics industries. The Agricultural Protection Products segment sells herbicides, fungicides, insecticides, and other agricultural chemicals that control weed growth, as well as control the spread of insects and other microorganisms that can damage plant growth. This segment also provides sprout inhibitor for potatoes and an herbicide for sugar cane. It serves pharmaceutical, nutraceutical, agricultural, coatings, and industrial chemical consuming industries. Aceto Corporation was founded in 1947 and is headquartered in Port Washington, New York.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/03/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: 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.