9 'Buy' Rated Small Cap Stocks Trading At A Discount

by: ZetaKap

Interested in following smaller companies? Do you prefer investing in stocks that analysts have weighed in on? Looking for undervalued stocks? If so, we ran a screen keeping this idea in mind.

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.

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.

We first looked for small cap stocks. From here, we then looked for companies that analysts rate as "Buy" (2 < mean recommendation < 3). We then looked for companies with a low price-multiple premium (forward P/E<10)(PEG Ratio < 1). We did not screen out any sectors.

Do you think these small-cap stocks will outperform? Use our list along with your own analysis.

1) Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI)

Sector: Financial
Industry: REIT - Diversified
Market Cap: $329.33M
Beta: -

Apollo Commercial Real Estate Finance, Inc. has a Analysts' Rating of 2.10 and Forward Price/Earnings Ratio of 9.15 and Price/Earnings to Growth Ratio of 0.88. The short interest was 3.88% as of 05/24/2012. Apollo Commercial Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States.

Apollo Commercial originates, acquires, invests in, and manages performing commercial first mortgage loans, commercial mortgage-backed securities, mezzanine financings, and other commercial real estate-related debt investments. The company is qualified as a real estate investment trust (REIT) under the Internal Revenue Code.

2) Apollo Global Management, LLC (NYSE:APO)

Sector: Financial
Industry: Diversified Investments
Market Cap: $1.43B
Beta: -

Apollo Global Management, LLC has a Analysts' Rating of 1.90 and Forward Price/Earnings Ratio of 4.20 and Price/Earnings to Growth Ratio of 0.46. The short interest was 5.51% as of 05/24/2012. Apollo Global Management, LLC is a publicly owned investment manager.

Apollo Global 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.

3) Altra Holdings, Inc. (NASDAQ:AIMC)

Sector: Industrial Goods
Industry: Industrial Electrical Equipment
Market Cap: $467.41M
Beta: 2.04

Altra Holdings, Inc. has a Analysts' Rating of 1.60 and Forward Price/Earnings Ratio of 9.59 and Price/Earnings to Growth Ratio of 0.82. The short interest was 4.90% as of 05/24/2012. Altra Holdings, Inc., through its subsidiary, Altra Industrial Motion, Inc., designs, produces, and markets a range of mechanical power transmission and motion control products worldwide.

The company provides industrial clutches and brakes for elevators, forklifts, lawn mowers, oil well draw works, punch presses, and conveyors; open and enclosed gearing products for conveyors, ethanol mixers, packaging machinery, and metal processing equipment; and engineered couplings for extruders, turbines, steel strip mills, and pumps.

4) AECOM Technology Corporation (NYSE:ACM)

Sector: Services
Industry: Technical Services
Market Cap: $1.88B
Beta: 1.13

AECOM Technology Corporation has a Analysts' Rating of 2.00 and Forward Price/Earnings Ratio of 6.14 and Price/Earnings to Growth Ratio of 0.51. The short interest was 1.78% as of 05/24/2012. AECOM Technology Corporation provides professional technical and management support services for commercial and government clients worldwide.

The company's Professional Technical Services segment offers planning, consulting, architectural and engineering design, and program and construction management services for a range of projects, including highways, airports, bridges, mass transit systems, government and commercial buildings, water and wastewater facilities, and power transmission and distribution. This segment serves industrial, commercial, institutional, and government clients in end markets, such as transportation, facilities, environmental, energy, water, and government markets.

5) Aircastle LTD (NYSE:AYR)

Sector: Services
Industry: Rental & Leasing Services
Market Cap: $811.37M
Beta: 2.24

Aircastle LTD has a Analysts' Rating of 2.30 and Forward Price/Earnings Ratio of 7.15 and Price/Earnings to Growth Ratio of 0.74. The short interest was 2.84% as of 05/24/2012. Aircastle Limited, through its subsidiaries, engages in the acquisition, lease, and sale of high-utility commercial jet aircraft to passenger and cargo airlines worldwide.

The company also makes investments in various aviation assets, including debt investments secured by commercial jet aircraft. As of December 31, 2011, its aircraft portfolio consisted of 144 aircrafts that were leased to 65 lessees located in 36 countries, and managed through offices in the United States, Ireland, and Singapore.

6) Atlas Air Worldwide Holdings Inc. (NASDAQ:AAWW)

Sector: Services
Industry: Air Services, Other
Market Cap: $1.23B
Beta: 2.38

Atlas Air Worldwide Holdings Inc. has a Analysts' Rating of 2.10 and Forward Price/Earnings Ratio of 7.50 and Price/Earnings to Growth Ratio of 0.80. The short interest was 6.97% as of 05/24/2012. Atlas Air Worldwide Holdings, Inc., through its subsidiaries, provides outsourced aircraft and aviation operating services in the United States and internationally.

The company offers aircraft operating solutions, including aircraft, crew, maintenance, and insurance services. It also provides full planeload cargo and passenger charter services to the United States military, as well as to charter brokers, cruise-ship operators, freight forwarders, direct shippers, and airlines.

7) AAR Corp. (NYSE:AIR)

Sector: Industrial Goods
Industry: Aerospace/Defense Products & Services
Market Cap: $514.50M
Beta: 1.24

AAR Corp. has a Analysts' Rating of 2.00 and Forward Price/Earnings Ratio of 5.91 and Price/Earnings to Growth Ratio of 0.48. The short interest was 5.59% as of 05/24/2012. AAR CORP. provides products and services to aviation, government, and defense markets worldwide.

The company's Aviation Supply Chain segment purchases and sells new, overhauled, and repaired engine and airframe parts and components. It also repairs, overhauls, and sells avionics, electrical, electronic, fuel, hydraulic, and pneumatic components and instruments, as well as internal airframe components; and provides customized inventory supply and management programs for engine and airframe parts and components.

8) Basic Energy Services, Inc. (NYSE:BAS)

Sector: Basic Materials
Industry: Oil & Gas Equipment & Services
Market Cap: $497.49M
Beta: 2.27

Basic Energy Services, Inc. has a Analysts' Rating of 2.10 and Forward Price/Earnings Ratio of 5.48 and Price/Earnings to Growth Ratio of 0.56. The short interest was 8.94% as of 05/24/2012. Basic Energy Services, Inc. provides various well site services to oil and natural gas drilling and producing companies in the United States.

The company's Completion and Remedial Services segment provides pressure pumping services, such as cementing, acidizing, fracturing, coiled tubing, nitrogen, and pressure testing; rental and fishing tools; coiled tubing; snubbing services; thru-tubing; cased-hole wireline services; and underbalanced drilling in low pressure and fluid sensitive reservoirs. This segment operates 222 pressure pumping units.

9) AmTrust Financial Services, Inc. (NASDAQ:AFSI)

Sector: Financial
Industry: Property & Casualty Insurance
Market Cap: $1.78B
Beta: 0.81

AmTrust Financial Services, Inc. has a Analysts' Rating of 1.80 and Forward Price/Earnings Ratio of 9.29 and Price/Earnings to Growth Ratio of 0.94. The short interest was 18.40% as of 05/24/2012. AmTrust Financial Services, Inc., through its subsidiaries, underwrites and provides property and casualty insurance in the United States and internationally.

The company operates in four segments: Small Commercial Business, Specialty Risk and Extended Warranty, Specialty Program, and Personal Lines Reinsurance. The Small Commercial Business segment provides workers' compensation, commercial package, and other commercial insurance lines to small businesses through wholesale and retail agents, and brokers.

*Company profiles were sourced from Finviz. Financial data was sourced from Yahoo Finance.

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