It can be a gloomy investment forecast when the price of a stock drops and the company does not appear well positioned for growth. However, there is clearly more optimism for a future price increase when a company has strong projected EPS growth rates. With this in mind, we ran a scan to find mid cap stocks in which the price has fallen, but based upon a price multiple perspective analysis, these stocks are potentially worth more. Of course, whether or not these companies can turn things around depends greatly upon their ability to grow. For our additional screening, we only included undervalued stocks that have significantly high projected EPS growth rates for the next year. Use the data and graphs below as a starting point for your own research on these mid cap stocks.
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 lets 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 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. 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 mid cap stocks. We then looked for companies that have expected earnings per share growth of more than 25 percent for next year (1-year projected EPS Growth Rate>25%). We then looked for businesses that are trading at a discount (P/S<1)(P/BV<1). We did not screen out any sectors.
Do you think these mid-cap stocks are undervalued? Please use our list to assist with your own analysis.
1) GenOn Energy, Inc. (NYSE:GEN)
|1-Year Projected Earnings Per Share Growth Rate||77.10%|
|Price/Book Value Ratio||0.41|
GenOn Energy, Inc., together with its subsidiaries, provides energy, capacity, ancillary, and other energy services to wholesale customers in the energy market in the United States. It also operates as a wholesale generator of electricity; and involves in asset management and proprietary trading, fuel oil management, and natural gas transportation and storage activities. The company generates electricity using coal, natural gas, and oil resources.
It operates 8 generating facilities with a total net generating capacity of 6,341 megawatt in Maryland, New Jersey, and Virginia; 23 generating facilities with a total net generating capacity of 7,483 megawatt in Illinois, Ohio, and Pennsylvania; 7 generating facilities with a total net generating capacity of 5,391 megawatt in California; and 8 generating facilities with a total net generating capacity of 4,482 megawatt in Florida, Massachusetts, Mississippi, New York, and Texas.
The company serves independent system operators, regional transmission organizations, power aggregators, retail providers, electric-cooperative utilities, other power generating companies, and load serving entities. GenOn Energy, Inc. was founded in 1982 and is headquartered in Houston, Texas.
2) Old Republic International Corporation (NYSE:ORI)
|Industry||Surety & Title Insurance|
|1-Year Projected Earnings Per Share Growth Rate||352.00%|
|Price/Book Value Ratio||0.66|
Old Republic International Corporation, through its subsidiaries, engages in underwriting insurance products in the United States and Canada. The company's General Insurance Group segment offers various insurance products, such as automobile extended warranty, aviation, commercial automobile, commercial multi-peril, general liability, home warranty, inland marine, travel accident, and workers' compensation insurance products. It also provides financial indemnity products for specialty coverages, including consumer credit indemnity, errors and omissions/directors and officers, fidelity, guaranteed asset protection, and surety.
This segment offers its liability insurance coverages for businesses, government, and other institutions in transportation, commercial construction, healthcare, education, retail and wholesale, forest products, energy, general manufacturing, and financial services industries. Old Republic International Corporation's Mortgage Guaranty Group segment insures first mortgage loans, primarily on residential properties incorporating one-to-four family dwelling units.
Its coverages comprise primary mortgage insurance that offers mortgage default protection on individual loans to mortgage bankers, brokers, commercial banks, and savings institutions; and pool insurance, which is written on a group of loans in negotiated transactions to mortgage banking customers. The company's Title Insurance Group segment provides lenders' and owners' title insurance policies to real estate purchasers and investors based upon searches of the public records.
It also offers escrow closing and construction disbursement services; and real estate information products, national default management services, and services pertaining to real estate transfers and loan transactions. Old Republic International Corporation markets its products directly, as well as through insurance agents and brokers. The company was founded in 1887 and is based in Chicago, Illinois.
3) Alcatel-Lucent, S.A. (NYSE:ALU)
|1-Year Projected Earnings Per Share Growth Rate||233.30%|
|Price/Book Value Ratio||0.65|
Alcatel-Lucent, S.A. provides networking and communications technology, products, and services to service providers, enterprises, and governments worldwide. Its Networks segment designs Internet protocol/multiprotocol label switching service routers, carrier Ethernet service switches, multi-service wide-area-network switches, and content delivery network appliances; designs, manufactures, and markets microwave wireless transmission equipment and optical networking equipment; offers wireless products for 2G, 3G, and 4G networks to mobile operators; and designs and develops IP multimedia subsystem products and IP-based fixed access products.
The company's Software, Services and Solutions segment specializes in the consulting, planning, design integration and optimization, and operations management and maintenance of multi-vendor telecommunications networks, as well as in the design, delivery, and operation of network-based software solutions.
This segment also develops and sells communication products and solutions that help customers transit to next generation voice, video, and messaging communications services; mobile commerce applications; payment and charging applications, including real-time rating, charging, billing, and payment applications for voice and data services; customer experience applications that enable communication providers to offer, activate, support, and manage a range of high-speed Internet, VoIP, video, mobile, and converged services; an open API platform, which allows developers to collaborate, build, test, and distribute new applications for service provider networks; and CloudBand solution that allows service providers to deliver cloud services to their customers. Alcatel-Lucent, S.A. was formerly known as Alcatel, S.A. and changed its name to Alcatel-Lucent, S.A. in December, 2006. The company was founded in 1898 and is based in Paris, France.
4) Genworth Financial Inc. (NYSE:GNW)
|1-Year Projected Earnings Per Share Growth Rate||98.44%|
|Price/Book Value Ratio||0.18|
Genworth Financial, Inc., a financial security company, provides insurance, wealth management, investment, and financial solutions in the United States and internationally. The company offers various insurance and fixed annuity products, including life and long-term care insurance products; payment protection insurance products for consumers primarily to meet specified payment obligations; and wealth management products, such as managed account programs with advisor support and financial planning services.
It also provides mortgage insurance products and related services to insure prime-based, individually underwritten residential mortgage loans or flow mortgage insurance; and mortgage insurance on a structured or bulk basis, as well as offers services, analytical tools, and technology that enable lenders to operate and manage risk. In addition, the company provides institutional products consisting of funding agreements, funding agreements backing notes, and guaranteed investment contracts. Genworth Financial, Inc. distributes its products and services through financial intermediaries, advisors, independent distributors, affinity groups, and sales specialists. The company was founded in 2003 and is headquartered in Richmond, Virginia.
5) United States Steel Corp. (NYSE:X)
|Industry||Steel & Iron|
|1-Year Projected Earnings Per Share Growth Rate||76.13%|
|Price/Book Value Ratio||0.91|
United States Steel Corporation engages in the production and sale of steel mill products in North America and Europe. The company operates in three segments: Flat-rolled Products (Flat-rolled), U. S. Steel Europe (USSE), and Tubular Products (Tubular). The Flat-rolled segment offers slabs, rounds, strip mill plates, sheets, and tin mill products. This segment serves customers in the service center, conversion, transportation, construction, container, appliance, and electrical markets. The USSE segment produces and sells slabs, sheets, strip mill plates, tin mill products, and spiral welded pipes, as well as heating radiators and refractory ceramic materials. This segment serves customers in construction, service center, conversion, container, transportation, appliance and electrical, oil, gas, and petrochemical markets.
The Tubular segment produces and sells seamless and electric resistance welded steel casing and tubing; and standard, line pipe, and mechanical tubing products. This segment serves customers in the oil, gas, and petrochemical markets. United States Steel Corporation also provides transportation services, including railroad and barge operations. It also owns, develops, and manages various real estate assets comprising approximately 200,000 acres of surface rights primarily in Alabama, Illinois, Maryland, Michigan, Minnesota, and Pennsylvania, as well as approximately 4,000 acres of land in Ontario, Canada. The company was founded in 1901 and is headquartered in Pittsburgh, Pennsylvania.
6) Mechel OAO (NYSE:MTL)
|Industry||Steel & Iron|
|1-Year Projected Earnings Per Share Growth Rate||83.33%|
|Price/Book Value Ratio||0.57|
Mechel OAO, together with its subsidiaries, operates as a mining and steel company primarily in the Russian Federation, other CIS countries, Europe, the Middle East, the United States, and rest of Asia. The company operates in four segments: Mining, Steel, Ferroalloys, and Power. The Mining segment produces and sells metallurgical and steam coal, coke and chemical products, iron ore, and limestone, as well as chemical products, such as coal tar, naphthalene, and other compounds; and provides coal washing services.
This segment operates four open pit and three underground coal mines in the Kuznetsky basin, western Siberia; three open pit coal mines in the Sakha Republic in eastern Siberia; three mining complexes in West Virginia; and three open pit iron ore mines near Zheleznogorsk-Ilimsky, eastern Siberia, as well as licenses for the Pionerskoye iron ore deposit, the Sutamskaya iron ore area, and the Sivaglinskoye iron ore deposit.
The Steel segment produces and sells semi-finished steel products; carbon and specialty long products; carbon and stainless flat products; and downstream metal products, including wire products, stampings, and forgings. The Ferroalloys segment produces and sells nickel ore, low-ferrous ferronickel, ferrochrome, and ferrosilicon. The Power segment is involved in the generation and sale of electricity and heat energy from steam coal; and power distribution activities. The company was incorporated in 2003 and is based in Moscow, Russian Federation.
7) Micron Technology Inc. (NASDAQ:MU)
|Industry||Semiconductor- Memory Chips|
|1-Year Projected Earnings Per Share Growth Rate||117.80%|
|Price/Book Value Ratio||0.84|
Micron Technology, Inc., together with its subsidiaries, engages in the manufacture and marketing of semiconductor devices worldwide. Its products for data storage and retrieval comprise dynamic random access memory products, including DDR2 and DDR3 for use as main system memory in computers and servers; and other specialty DRAM memory products, such as DDR and DDR2 mobile low power DRAM, DDR, SDRAM, reduced latency DRAM, and pseudo-static RAM used in laptop computers, tablets, and other consumer devices. The company also offers NAND flash memory products, including RealSSD solid-state drives, flash memory cards, CompactFlash and memory stick products, SD memory cards, and JumpDrive products used in mobile phones, MP3/4 players, computers, solid-state drives, tablets, digital still cameras, and other personal and consumer applications.
In addition, it resells flash memory products that are purchased from other suppliers; and involves in solar operations. Further, Micron Technology, Inc. provides NOR flash memory products that are electrically re-writeable, non-volatile semiconductor memory devices used in consumer electronics, industrial, wired and wireless communications, computing, and automotive applications; and phase change memory products, CMOS image sensors, light emitting diodes, and microdisplays. The company sells its products to original equipment manufacturers and retailers through its internal sales force, independent sales representatives, and distributors, as well as through a Web-based customer direct sales channel, and channel and distribution partners. Micron Technology Inc. was founded in 1978 and is headquartered in Boise, Idaho.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on September 14, 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.