Some investors wait till the price is right to get in on a stock they have had their eye on. This is a method that works well when the company is well known and a potential investor has already done the research. But there are a lot of stocks out there, and in some cases, the right time to be introduced to a new stock is when it appears to be trading below its true value. For our list today we scanned dividend stocks to find those that offer moderate to high yields, but also appear to be undervalued. In addition, these companies have minimal debt, which speaks to their sound capital structure. We think you will find the list of dividend stocks worthy of further investigation.
The Long Term Debt/Equity Ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
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 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.
We first looked for dividend stocks. We next screened for businesses that operate with little to no long-term debt (Long-Term D/E Ratio<.1). Next, we then screened for businesses that appear undervalued from a price-multiple perspective (P/E<10)(PEG < 1). We did not screen out any market caps or sectors.
Do you think these stocks failed to price their value accurately? Use our list to help with your own analysis.
1) TESSCO Technologies Inc. (TESS)
|Long Term Debt/Equity Ratio||0.03|
|Price/Earnings to Growth Ratio||0.65|
TESSCO Technologies Incorporated provides products and value chain solutions to organizations for building, operating, and maintaining wireless broadband systems primarily in the United States. It offers base infrastructure products, including base station antennas, cable and transmission lines, small towers, lightning protection devices, connectors, power systems, miscellaneous hardware, and mobile antennas to build, repair, and upgrade wireless telecommunications; and connector installation, custom jumper assembly, site kitting, and logistics integration services. The company also provides network systems products comprising fixed and mobile broadband equipment, wireless networking, filtering systems, two-way radios, and security and surveillance products to build and upgrade computing and Internet networks; and training classes, technical support, and engineering design services.
In addition, it offers installation, test, and maintenance products, such as analysis equipment; various frequency, voltage, and power-measuring devices; and an assortment of tools, hardware, GPS, and replacement parts and components used by service technicians to install, tune, and maintain wireless communications equipment. Further, the company provides mobile devices and accessory products consisting of cellular phone and data device accessories, including replacement batteries, cases, speakers, mobile amplifiers, power supplies, headsets, mounts, car antennas, music accessories, and data and memory cards. It serves carrier and public network operators, tower owners, program managers, contractors and integrators, wireless Internet service providers, industrial and enterprise self-maintained users, governments, manufacturers, repair centers, value-added resellers, independent agents, dealers and consumers, and retailers. The company was founded in 1982 and is headquartered in Hunt Valley, Maryland.
2) Intersections Inc. (INTX)
|Long Term Debt/Equity Ratio||0.02|
|Price/Earnings to Growth Ratio||0.98|
Intersections Inc. provides subscription based consumer protection services and other consumer products and services primarily in the United States. The company operates in three segments: Consumer Products and Services, Online Brand Protection, and Bail Bonds Industry Solutions. The Consumer Products and Services segment offers identity theft protection and credit information management products and services, such as credit reports, credit monitoring, credit scores, credit education, reports and monitoring of additional information, identity theft recovery, identity theft cost reimbursement, and software and other technology tools and services.
This segment also provides data breach response; accidental death and disability insurance; and other membership products and services, as well as access to healthcare, home, auto, financial, and other services and information. The Online Brand Protection segment offers online brand protection services comprising online channel monitoring, auction monitoring, and other services, as well as forum, blog, and newsgroup monitoring services to corporate brand owners or law firms. The Bail Bonds Industry Solutions segment provides automated service solutions for the bail bonds industry, which include accounting, reporting, and decision making tools that allow bail bondsmen, general agents, and sureties to run their offices, to exercise operational and financial control over their businesses, and to make underwriting decisions. The company was founded in 1996 and is headquartered in Chantilly, Virginia.
3) GameStop Corp. (GME)
|Long Term Debt/Equity Ratio||0.00|
|Price/Earnings to Growth Ratio||0.86|
GameStop Corp. operates as a video game retailer. It sells new and used video game hardware; physical and digital video game software; and accessories and other products that primarily include controllers, memory cards, and other add-ons, as well as strategy guides, magazines, and trading cards. The company also offers personal computer entertainment and other software across various genres, including sports, action, strategy, adventure/role playing, and simulation, as well as products that relate to the digital category comprising network point cards, prepaid digital and online timecards, and digitally downloadable software.
GameStop Corp. sells its products primarily through its GameStop, EB Games, and Micromania stores, as well as through its electronic commerce Websites, including gamestop.com, ebgames.com.au, gamestop.ca, gamestop.it, gamestop.es, gamestop.ie, gamestop.de, and micromania.fr. As of March 22, 2012, its retail network and family of brands included 6,683 company-operated stores in 17 countries worldwide. In addition, the company publishes Game Informer, a video game magazine in the United States; and operates a Website, gameinformer.com, featuring reviews of new title releases, tips, and secrets about games and news regarding current developments in the electronic game industry. Further, it operates an online video gaming Website kongregate.com; and digital PC distribution platforms, Impulse and Spawn Labs. GameStop Corp. was founded in 1994 and is headquartered in Grapevine, Texas.
4) Xinyuan Real Estate Co., Ltd. (XIN)
|Long Term Debt/Equity Ratio||0.00|
|Price/Earnings to Growth Ratio||0.26|
Xinyuan Real Estate Co., Ltd., together with its subsidiaries, engages in the development of residential real estate projects in China. The company's residential projects comprise various multiple residential buildings that include multi-layer apartment buildings, sub-high-rise apartment buildings, or high-rise apartment buildings; and small scale residential properties. Its projects include auxiliary services and amenities, such as retail outlets, leisure and health facilities, kindergartens, and schools. The company also offers property management and other real estate related services, such as gardening and landscaping, and installing intercom systems and fixtures. In addition, it leases properties, including an elementary school, a basement, three clubhouses, five kindergartens, and parking facilities.
As of December 31, 2011, the company had completed 22 projects with a total gross floor area of approximately 2,143,862 square meters and comprising a total of 24,303 units, as well as 11 projects under construction with a total GFA of 2,647,846 square meters. It primarily operates in seven tier II cities, comprising Hefei, Jinan, Kunshan, Suzhou, Zhengzhou, Xuzhou, and Chengdu. Xinyuan Real Estate Co., Ltd. was founded in 1997 and is headquartered in Beijing, China.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/04/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.