Do you consider yourself a value investor? We ran a screen with that perspective in mind.
We began by screening the basic materials sector for high-growth stocks, with 5-year projected EPS growth above 15%.
Then we screened that universe for those that appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.
It is based off of a stock's EPS and book value per share (BVPS).
Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)
The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.
Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.
List sorted by potential upside implied by the Graham Number.
1. Atwood Oceanics, Inc. (NYSE:ATW): Engages in offshore drilling, and the completion of exploratory and developmental oil and gas wells. Market cap at $2.97B, most recent closing price at $45.38. 5-year projected EPS growth at 20%.
Diluted TTM earnings per share at 4.14, and a MRQ book value per share value at 29.63, implies a Graham Number fair value = sqrt(22.5*4.14*29.63) = $52.54. Based on the stock's price at $44.83, this implies a potential upside of 17.19% from current levels.
2. Energy Transfer Partners LP (ETP): Engages in the natural gas midstream, and intrastate transportation and storage businesses in the United States. Market cap at $12.9B, most recent closing price at $42.92. 5-year projected EPS growth at 15.23%. Diluted TTM earnings per share at 4.35, and a MRQ book value per share value at 27.38, implies a Graham Number fair value = sqrt(22.5*4.35*27.38) = $51.77. Based on the stock's price at $42.36, this implies a potential upside of 22.21% from current levels.
*BVPS and EPS data sourced from Yahoo! Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: Business relationship disclosure: Kapitall is a team of analysts. This article was written by Sabina Bhatia, one of our writers. 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.