3 Highly Undervalued Stocks With Impressive Profitability

Includes: FMCN, WBC, WTW
by: Kapitall

Do you take a value approach to stock investing? If so, we ran a screen you may be interested in reading.

We began by screening for stocks that appear highly undervalued: those with PEG ratios below 1 and P/FCF ratios below 15.

We then screened for those with strong profitability compared to industry peers, with higher gross, operating, and pretax margins than their industry averages by at least 5% on each margin. This indicates that these companies are taking a greater percentage of their revenues as profits, and they also have stronger control over their cost structures.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall (kapitall.com).

Do you think these stocks are trading below their fair value? Use this list as a starting point for your own analysis.

List sorted by difference between pretax margin and industry average.

1. Focus Media Holding Ltd. (FMCN): Operates out-of-home advertising network using audiovisual digital displays in China. Market cap at $2.52B, most recent closing price at $19.49. PEG at 0.46. P/FCF at 9.25. TTM gross margin at 69.3% vs. industry average at 41.25%. TTM operating margin at 30.25% vs. industry average at 19.22%. TTM pretax margin at 28.7% vs. industry average at 14.52%.

2. Weight Watchers International, Inc. (WTW): Provides weight management services worldwide. Market cap at $2.76B, most recent closing price at $49.64. PEG at 0.86. P/FCF at 12.66. TTM gross margin at 59.88% vs. industry average at 51.99%. TTM operating margin at 28.22% vs. industry average at 18.97%. TTM pretax margin at 24.95% vs. industry average at 15.85%.

3. WABCO Holdings Inc. (WBC): Develops, manufactures, and sells braking, stability, suspension, and transmission control systems primarily for commercial vehicles. Market cap at $3.18B, most recent closing price at $49.43. PEG at 0.63. P/FCF at 12.97. TTM gross margin at 31.94% vs. industry average at 20.57%. TTM operating margin at 13.66% vs. industry average at 8.19%. TTM pretax margin at 13.82% vs. industry average at 7.26%.

*Profitability data sourced from Fidelity, 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.