2 Top Value Stocks Based On PEG Ratio

Includes: CBI, USNA
by: Matthew D. McCall

Chicago Bridge & Iron Company (NYSE:CBI) is an engineering, procurement and construction firm that focuses on the energy and natural resources industries. The stock trades with a PEG ratio of 0.87 and pays a dividend of 0.4%. The company recently reported quarterly earnings that saw revenue increase by 26% and net income rise by 20%.

A major factor CBI is on my radar is the work it is doing with two potentially big niche energy projects - oil sands and liquefied natural gas (NYSEMKT:LNG). According to the company's COO during its latest conference call, he expects LNG to continue growing at a rate twice as fast as natural gas production with the LNG portion of the gas supply forecast to increase by approximately 20% over the next two decades. CBI could benefit greatly from the construction of new LNG export terminals as the commodity is shipped around the globe.

Technically CBI had a very bullish day on 4/25 when it closed at a new two-week high on heavy volume. The mini-breakout was a buy signal that was enough of a move to warrant at least a half a position at some point this week. The support level to watch is $40.34, the low of April.

USANA Health Sciences (NYSE:USNA) is a nutritional and personal care company that distributes its products through a network of independent distributors. The marketing and distribution is similar to Avon (NYSE:AVP) and its representatives. The stock trades with a PEG ratio of 0.59 and a forward P/E ratio of 10.6. Earlier this week the stock reported blockbuster earnings and broke out of a consolidation pattern on heavy volume. Even with the stock at a 52-week high, it is well off the high of $61.80 set back in early 2007.

The company reported record first quarter results and raised its 2012 outlook. Net sales increased by 7.4% and earnings per share jumped by 28.6% to $0.90 for the quarter. For the entire year the company now sees earnings per share between $3.60 and $3.70. Based on the stock at $41/share that equates to a P/E ratio of 11.2 at the median forecast.

Companies with similar marketing strategies have been successful in the last few years and USNA could be a bargain at current levels. Take a look at a stock that I do own, Nu Skin Enterprises (NYSE:NUS). The company has a distribution model that is not far from USNA and if the performance of NUS is any indication, look for higher prices out of USNA.

I do not own either of the two companies at the time of writing, but both are at the top of my buy list and could be added to client portfolios in the future.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CBI, USNA over the next 72 hours.