The market frequently underprices stocks as it follows a herd mentality, misrepresents data, believes misinformation and takes a random walk all the while taking full advantage of its tunnel vision. Is it any wonder they get surprised so often? Here are five stocks that may surprise the market in the near future.
Synchronoss Technologies (NASDAQ:SNCR): Synchronoss Technologies recently reported third quarter results beating analyst revenue estimates. The consensus was a revenue of $58.3 million but the company reported a revenue of $59.2 million (see this Business Wire). Synchronoss Technologies supplies wireless carriers with transaction management services and the company saw a jump of 67% in earnings on increased demand in the quarter. The company also reported a $0.04 per share increase in net income over last year coming in at $3.57 million or $0.09 per share. In the same quarter last year Synchronoss Technologies reported a net income of $2.14 million or $0.05 per share. For comparison sake the company's two closest competitors are CSG International Inc. (NASDAQ:CSGS) and Amdocs Ltd. (NYSE:DOX). CSG International Inc. has a PEG ratio of 0.95 with a forecast earnings growth of -12.78% in 2011 and 7.04% in 2012, Amdocs Ltd. has a PEG ratio of 1.15 with a forecast earnings growth of 0.00% in 2011 and 14.86% in 2012. Synchronoss Technologies has a PEG ratio of 2.57 indicating that it is quite expensive in relation to its competitors but the company's forecast earnings growth of 28.17% in 2011 and 46.75% in 2012 far exceeds both of its competitors and may justify the premium.
Intel (NASDAQ:INTC): Statistical analysis has shown that sales of semiconductors have an 80% correlation to gross domestic product and official government data proves that we are coming out of the trough in the most recent economic downturn - see the stats from The Burrow of Economic Analysis. The semiconductor industry in general is subject to fluctuations in consumer demand (i.e. sales of personal computers). This has been lagging but specifically Intel has been making inroads with its Atom microprocessor for smart phones. Smartphone sales are still strong and this should compensate for the lag in personal computer sales in the near term (see this article on Semiconductor Cyclicality). For a comparison in both markets we will look at Intel's two closest competitors: Advanced Micro Devices (NASDAQ:AMD) and Marvell Technology Group (NASDAQ:MRVL). Intel currently has a PEG ratio of 0.98 with forecast earnings growth of 19.68% in 2011 and 4.99% in 2012. Advanced Micro Devices has a PEG ratio of 1.31 with forecast earnings growth of -3.34% in 2011 and 25.71% in 2012. Marvell Technology Group (MRVL) has a PEG ratio of 0.72 with forecast earnings growth of -18.05% in 2012 - all indicating that Intel is the better buy at its current stock price in terms of growth through 2012.
NCR Corporation (NYSE:NCR): Since NCR Corporation reported third quarter results on October 27th the stock has risen from $16 per share to over $20 per share (see this article). The results were far better than expected due in large part to a new ATM services contract with one of China’s largest banks and other business services in emerging markets. Revenues in the quarter were up over 16% year over year coming in at $1.40 billion or $0.53 per share, expectations were for revenues of $1.37 billion or $0.47 per share. NCR Corporation also raised its guidance for the full year to revenue growth of 8% to 10% on profits of $1.79 to $1.83 per share. Previous guidance was for 6% to 8% on profits of $1.73 to $1.80 per share. NCR Corporation’s two closest competitors are Unisys (NYSE:UIS) and Oracle (NYSE:ORCL). For a comparison we will look at their PEG and growth prospects. NCR Corporation has a PEG ratio of 0.89 with forecast earnings growth of 19.79% in 2011 and 22.42% in 2012, while Unisys has a PEG ratio of a very expensive 2.23 yet only forecast earnings growth of -35.69% in 2011 and 32.34% in 2012. Oracle has a PEG ratio of 0.95 with forecast earnings growth of 9.69% in 2011 and 9.77% in 2012, indicating NCR Corporation is the cheaper of the three but has the best growth prospect going forward.
Micron Technology (NASDAQ:MU): In May of 2011 Micron Technology was a $12 stock since then it has fallen all the way to $4 per share and most recently it has leveled off at around $6 per share. The reason for this volatility is that the jury is still out (literally) on whether the company will win the antitrust case brought against it (see this article). Rambus Inc. (NASDAQ:RMBS) has brought a lawsuit against Hynix Semiconductor Inc (000660:Korea SE) and Micron Technology that could potentially be in the billions of dollars. Micron Technology has not been known for making money and a loss of this magnitude could be devastating to the company. So let's pair the two U.S. traded rivals against each other and see where they stand. Micron Technology has a price to earnings ratio of 20.86 for 2011 and 25.39 for 2012 with forecast earnings growth of -19.05% for 2011 and 192.65% in 2012. Rambus Inc. has a price to earnings ratio of -81.86 for 2011 and -85.76 in 2012 with forecast earnings growth of -138.69% for 2011 and 4.62% in 2012. With this rosy outlook for 2012, Micron Technology is the clear winner according to these metrics but as I have mentioned, the jury is still out for 2011.
Level 3 Communications (NASDAQ:LVLT): In June 2011, Level 3 Communications was peaking at the $40 per share level. It has since lost half its value and is hovering around the $20 per share mark. The question is does the company deserve this hammering? On November 3rd Level 3 Communications reported a larger loss than expected, at $1.51 per share, coming in at $1.75 per share or $207 million in total (see this article). On the other hand some of the loss was due to repayment of debt and the company beat the revenue expectation of $939.9 million coming in at $947 million, up 4% from $912 million a year ago. The company also reaffirmed its fourth quarter revenue guidance. To gain a better understanding of the future prospects of Level 3 Communications we will compare it to two of its closest rivals AT&T (NYSE:T) and Verizon Communications (NYSE:VZ). Level 3 Communications has a PEG ratio of -0.20 with forecast earnings growth of 30.33% in 2012 and 44.33% in 2013 while AT&T has a PEG ratio of 2.04 with forecast earnings growth of only 6.64% in 2012 and 3.30% in 2013. Verizon Communications has a PEG ratio of 2.96 with forecast earnings growth of 16.13% in 2012 and 11.91% in 2013. These metrics indicate that Level 3 Communications is very much oversold and actually has better earnings growth than the big two.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.