Can These 5 Stocks Break Out Above $20?

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Includes: AABA, CVV, DUK, GE, TSL
by: Vatalyst

These five stocks have been trading below or near $20 a share, so I take a look at some key metrics to see if they are truly undervalued.

CVD Equipment Corp. (NASDAQ:CVV) – This company engineers manufacturing equipment that is used in the research and production of alternative energy, nanotechnology, graphene, optoelectronics, semiconductors and microelectromechanical systems. It is currently trading near $15 a share. Share price has increased over the past year, but is trading down from its 52-week high of $19.18 reached on Aug. 30. Earnings per share is $0.39, and price to earnings ratio is 38.19. Price/earnings to growth ratio is 1.31. Price to book value is 3.29. Operating margin is 12.91 percent. Debt to equity ratio is .83. Market capitalization is $91.24 million, and its enterprise value is $69.38 million.

Its competitor Novellus Systems Inc. (NVLS) is currently trading near $31 a share. It reached its 52-week high of $41.38 on March 4 and its low of $26.22 on Oct. 3. Earnings per share is $3.56, and price to earnings ratio is 8.75. Price/earnings to growth is 0.91, and price to book value is 2.05. Operating margin is 24.60 percent. Debt to equity ratio is 0.85. Market capitalization is $2.17 billion, and its enterprise value is $1.74 billion.

CVV posted record revenue, income and backlog for its second quarter ended June 30. Revenue of $7.51 million was up from $3.38 million for the same period last year. Second-quarter income of $1.2 million was up from $126,000 from the second quarter 2010. Backlog as of the end of the second quarter set a record at $22.2 million, which was an increase of 376.2 percent from the $4.67 million at the end of the second quarter 2010.

CVD recently acquired additional manufacturing space near its Ronkonkoma, N.Y., facility to help accommodate future order levels. Insiders and 5 percent owners hold about 34 percent of the company’s shares.

CVV is a company that is on the cutting edge of innovation and technology. Its earnings and orders point to imminent economic recovery. It is outperforming its industry in terms of quarterly revenue growth, and operating margin. Both its price to earnings ration and price/earnings to growth ratios are higher than industry averages. Based on its enterprise value, however, shares are currently overpriced and should be trading near $11.90. I like the stock, though, and other metrics point to it being undervalued. CVV warrants additional research and consideration from growth investors.

Trina Solar Ltd. (NYSE:TSL) – This Chinese manufacturer of solar/photovoltaic modules is currently trading near $7 a share, down considerably from its 52-week high of $30.40 on Feb. 24 and up only slightly from its low of $5.58 on Oct. 3. Earnings per share is $3.87, and price to earnings ratio is 1.88. Price/earnings to growth ratio is 0.50, and price to book value is 0.39. Operating margin is 12.61 percent, and debt to equity ratio is 1.12. Market capitalization is $513.32 million, and its enterprise value is $746.89.

A competitor Yingli Green Energy Holding Co. Ltd. (NYSE:YGE), also of China, is trading just under $4 a share, which is close to its 52-week low of $2.87 reached on Oct. 3. It is down significantly from its 52-week high of $12.87 reached on Nov. 8, 2010. Earnings per share $1.69, and price to earnings ratio is 2.22. Price/earnings to growth is 0.29, and price to book value is 0.39. Operating margin is 18.25 percent. Debt to equity ratio is 1.35. Market capitalization is $591.15 million, and its enterprise value is $1.39 billion.

TSL’s earnings per share is much higher than the industry average. Its price to earnings ratio is much lower, and its price/earnings to growth ratio is comparable. Operating margin is higher than the industry average. A steep decline in European demand has prompted U.S. solar companies to seek anti-dumping duties on made-in-China solar energy products. Chinese companies, which receive huge cash grants, tax breaks, discounts on raw materials, and other significant subsidies, are able to bring their products to market at tremendous discounts. Other reports indicate that buyer sentiment is shifting to well-regulated U.S. companies in the wake of a chemical waste spill at another Chinese solar panel maker.

I do not see metrics, market indicators or consumer sentiment indicating that TSL should be trading at a higher price at this time. There are other opportunities for value/growth investors.

Yahoo Inc. (YHOO) – This website and online media/community builder is currently trading near $16 a share. It reached a 52-week high of $18.65 on May 6 and plummeted to 11.09 on Aug. 8 before bouncing back to its current level. Earnings per share is $0.88, and price to earnings ratio is $18.33. Price/earnings to growth is 1.57, and price to book value is 1.63. Operating margin for the quarter ended June 30 was 15.16 percent. Debt to equity is .19. Market capitalization is $20.38 billion, and enterprise value is $17.92 billion.

Its much larger competitor Google Inc. (NASDAQ:GOOG) is currently trading near $592 a share. It has ranged from $473.02 to $642.96 over the past 52 weeks. Earnings per share is $29.34, and price to earnings ratio is 20.17. Price/earnings to growth ratio is 0.83, and price to book value is 3.44. Operating margin is 32.76 percent. GOOG reported strong third quarter results on Oct. 13. Its debt to equity ratio is .25. Market capitalization is $191.24 billion, and enterprise value is $153.31 billion.

YHOO’s third-quarter results, which were released Tuesday, reflect the company’s weakening advertising revenues and disappointing results with its partnership with Microsoft Corporation (NASDAQ:MSFT). Revenue was down 5 percent from the same quarter last year, and income was down 6 percent. A content sharing partnership with ABC News was recently announced. Founder/CEO of Alibaba Group Jack Ma announced publicly on Friday that he is interested in purchasing YHOO. Alibaba Group owns Alibaba.com, the Chinese Internet marketplace. YHOO holds an interest in Alibaba. Reports indicate that an acquisition by a China-based company raises privacy and national security issues, but American partners can ease these concerns. In February 2008, MSFT offered to purchase outstanding shares of YHOO for $31 each.

YHOO appears to have fallen out of favor with investors, which signals a possible discounted share price. Analyst recommendations are trending toward “Hold,” with some “Buys” and “Strong Buys.” Based on its enterprise value, shares should be trading near $14.22. I don’t see YHOO as a big bargain or value investment at this time, though interested potential investors should keep a close eye on the headlines.

General Electric Co. (NYSE:GE) – This Dow 30 energy/tech industrial giant is currently trading near $16 a share, up from its 52-week low of $14.69 reached on Oct. 30 and down from its 52-week high of $21.52 reached on Feb. 17. Its dividend yield is 3.6 percent or $0.60. Earnings per share is $1.27, and its price to earnings ratio is 12.92. Price/earnings to growth is 0.80, and price to book value is 1.38. Operating margin for the quarter ended June 30 was 11.47 percent. Debt to equity ratio is very high at 4.9. Market capitalization is $174.11 billion, and its enterprise value is $557.2 billion.

Its Dow 30 peer United Technologies Corp. (NYSE:UTX) is currently trading near $75 a share with a 52-week range of $66.87 to $91.83. Its dividend yield is 2.6 percent or $1.92. Earnings per share is $5.16, and price to earnings ratio is 14.55. Price/earnings to growth is 1.10, and price to book value is 2.97. Operating margin is 14.34 percent. Debt to equity ratio is 1.67. Market capitalization is $68.43 billion, and enterprise value is $73.47 billion.

GE posted strong third-quarter results on Friday. Operating earnings were up 11 percent, marking the sixth consecutive quarter of double-digit growth in operating earnings. Total revenues were $35.4 billion. Industrial backlog set a record at $191 billion. Industrial orders grew 16 percent over the same period last year. GE Capital earned $1.5 billion, up 79 percent from the same quarter last year. Not all the news was positive, however. Its energy segment profit was down 9 percent. Management is forecasting double-digit growth in operating earnings per share in 2012.

GE is definitely trading at a bargain. It is a stable company with a nice dividend, a history of paying, and a payout ratio of 43 percent. It is a leader in its industry that is recognized worldwide. In looking at its enterprise value only, shares should be trading over $50. GE is a solid, steady holding for income investors, new investors, and those with medium- to long-term investment horizons.

Duke Energy Corporation (NYSE:DUK) - This Dow 30 energy company/electrical utility is now trading over $20 a share, which is setting a 52-week record high. It is up from its low of $17.25 reached on Aug. 11. Its dividend yield is 5 percent or $1 a share. Earnings per share is $1.54, and its price to earnings ratio is 13.35. Price/earnings to growth is 4.04, and price to book value is 1.19. Operating margin is 20.78 percent. Its debt to equity ratio is 1.63. Market capitalization is $27.34 billion, and its enterprise value is $44.58 billion.

American Electric Power Inc. (NYSE:AEP) - This electrical utility is currently trading near $39 a share with a 52-week range of $33.09 to $39.35. Its dividend yield is 4.8 percent or $1.84. Earnings per share is $2.99, and price to earnings ratio is 13.08. Price/earnings to growth is 2.86, and price to book value is 1.35. Operating margin is 20.62 percent. Debt to equity is 2.64. Market capitalization is $18.86 billion, and enterprise value is $36.61 billion.

DUK second-quarter earnings showed continued momentum. Operating revenues were up, while operating expenses were down from the same quarter last year. The company is on track with its strategic initiatives, which include a proposed merger with Progress Energy, efforts to modernize its fleet, settling pending rate cases in the Carolinas, and more.

There are good reasons to buy this stock. It is a stable company, has a nice dividend yield and payment record, and appears to be on a track of profitability. Though it is trading near its 52-week high, it still appears to be a value, since, based on its enterprise value, shares should be trading around $33.50.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.