Unless you have been waiting patiently for the price of a certain stock to drop to just the right price, chances are you don't get too excited when you learn about a random stock that is trading cheaply. Experienced investors know that more information is needed before moving forward. From this perspective, we scanned for stocks within the financial sector that appear to be trading at a discount based upon price-multiple value measurements. We then selected stocks that have projected EPS growth rates above 25% for the coming year. If stocks of this nature intrigue you, then you would like the list below.
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 forward P/E is a price multiple valuation metric, which is similar to the current P/E ratio, except that it uses the forecasted earnings instead. While this number might not be as accurate because it uses forecasted 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.
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. We then looked for companies that are trading at a discount when considering the company growth rate (PEG Ratio < 1)(forward P/E<10). We then looked for companies with estimated high-growth, with 1-year projected EPS growth above 25%. We did not screen out any market caps.
Do you think these stocks can offer attractive returns? Please use our list to assist with your own analysis.
1) Apollo Global Management, LLC (APO)
|Price/Earnings to Growth Ratio||0.55|
|Forward Price/Earnings Ratio||4.96|
|1-Year Projected Earnings Per Share Growth Rate||27.40%|
Apollo Global Management, LLC is a publicly owned investment manager. The firm primarily provides its services to pension and endowment funds, institutional investors, individual investors, pooled investment vehicles, and corporations. It manages client focused portfolios, hedge funds, real estate funds, and private equity funds for its clients. The firm invests in the fixed income and alternative investment markets across the globe. Its alternative investments include investment in private equity and real estate markets. The firm's private equity investments include traditional buyouts, distressed buyouts and debt investments, corporate partner buyouts, distressed asset, turnaround, corporate restructuring, special situation, acquisition, and industry consolidation transactions.
Its fixed income investments include distressed debt, senior bank loans, and value oriented fixed income securities. The firm seeks to invest in chemicals; commodities; consumer and retail; oil and gas, metals, mining, agriculture, commodities, distribution and transportation; financial and business services; manufacturing and industrial; media distribution, cable, entertainment, and leisure; energy, packaging and materials; and satellite and wireless. It seeks to invest in companies based in across North America with a focus on United States, and Europe. The firm employs a combination of contrarian, value, and distressed strategies to make its investments. It conducts an in-house research to create its investment portfolio. The firm seeks to acquire minority positions in its portfolio companies. Apollo Global Management, LLC was founded in 1990 and is headquartered in New York, New York with nine additional offices in North America, Europe, and Asia.
2) Crawford & Company (CRD-B)
|Price/Earnings to Growth Ratio||0.52|
|Forward Price/Earnings Ratio||6.60|
|1-Year Projected Earnings Per Share Growth Rate||27.87%|
Crawford & Company provides claims management solutions to risk management and insurance industry worldwide. It offers field investigation and evaluation of property and casualty insurance claims. These services include property claims management services for various types of losses; casualty claims management services ranging from initial investigation through settlement; vehicle services, including vehicle damage appraisal, heavy equipment appraisal, and vehicle condition inspection; ClaimsAlert, a centralized claim intake center; contractor connection solution for high-frequency, low-severity claims; business process outsourcing solutions; technical services to evaluate and assess damages under extreme conditions; and catastrophe services, an independent adjusting resource for insurance claims management.
The property and casualty insurance claims services also cover various risk categories, including household and commercial, environmental pollution, construction, class action, marine, specie and fine art, banking and financial, political risks, livestock, reinsurance, and medical and vocational case management, as well as oil, energy, and engineering. The company also provides third-party administrator services comprising workers' compensation and liability claims management, and medical management services, as well as risk management information systems software and services designed for corporate risk managers to consolidate disparate workers' compensation, and property and liability claims data to analyze and manage losses and risk to exposures. In addition, it offers legal settlement administration services related to settlements of securities cases, product liability cases, bankruptcy noticing and distribution, and other legal settlements by identifying and qualifying class members, determining and dispensing settlement payments, and administering the settlement funds. Crawford & Company was founded in 1941 and is headquartered in Atlanta, Georgia.
3) Barclays PLC (BCS)
|Industry||Foreign Money Center Banks|
|Price/Earnings to Growth Ratio||0.60|
|Forward Price/Earnings Ratio||6.02|
|1-Year Projected Earnings Per Share Growth Rate||38.20%|
Barclays PLC provides various financial products and services worldwide. It offers retail and commercial banking, credit cards, investment banking, wealth management, and investment management services. The company's personal banking products include bank accounts, a range of credit cards through Barclaycard, savings accounts, loans, insurance, online banking, and mortgages through Woolwich. Its corporate and business banking services comprise online banking, savings and investments, card services, risk management services, leveraged finance, international trading, and business loans, as well as support for businesses from microenterprises to multinationals, and access to services from Barclays investment banking and investment management portfolio. The company also provides investment banking services, such as strategic advisory, financing, and risk management services to large corporate, government, and institutional clients. In addition, it offers wealth management services, which include international and private banking, investment management, fiduciary, and brokerage services. Barclays PLC was founded in 1896 and is headquartered in London, the United Kingdom.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on 09/15/2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.