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Compelling Valuations, Attractive Dividends In CDI And NTRI

|Includes: CDI, Nutrisystem Inc (NTRI)

While trading at historical levels, the U.S. equity markets are still providing some good options for long-term investors in terms of value buys. CDI Corporation (NYSE: CDI) and NutriSystem Inc. (NASDAQ: NTRI) are such examples where valuations are reasonable, dividends are solid, and visibility of earnings growth is high.

CDI Corporation largely operates as a professional services staffing company, although it also offers engineering and information technology solutions to its clients. Over 65 percent of its revenues are generated by the professional staffing business. This is a highly stable and steadily growing business as reflected in the latest quarter. Although profits tanked 18 percent to $2 million in the quarter, it was largely due to onetime restructuring costs. The company's realignment plan is likely to result in pre-tax cost savings of $11 million to $13 million in 2014.

Meanwhile, the correction after the results announcement has made the stock more attractive. While a forward price earnings ratio of 14.3 and the dividend yield of 3.7 percent are surely attractive, the current market price below the book value of $14.5 per share is fantastic. At the same time, the company's balance sheet has no long-term debt. The stock is particularly attractive from the standpoint that contract workers are becoming more common in information technology, engineering and technical industries.

NutriSystem Inc. is a well known player in the weight management space. The company supplies calibrated breakfasts, lunches, dinners and desserts to its clients on a monthly basis. Given the growing awareness about the obesity issue in the country, it is clear NutriSystem operates in a strong market where capitalizing on revenue growth shouldn't be a challenge. Moreover, the benefits of the company's turnaround plan have started to show in the financial performance.

Revenues grew 16 percent to $122.2 million in the first quarter ended March, representing third consecutive quarter of top line growth. Bottom line also swung to a profit of $224,000, resulting in earning per share of $0.01. This compares to a loss of $0.02 per share in the same period last year. Consistent performance in the last three quarters has attracted the attention of investors and the stock has advanced 11 percent in the last three months, but it still trades at a good 16 percent discount to 52-week high.

Analysts at B. Riley & Company recently increased their target price on the stock to $22 per share, reflecting more than 30 percent upside from current levels. Among its strengths are debt free operations and a growing focus on retail customers. The stock currently trades at a forward price earnings ratio of 22.1 and offers a dividend yield of 4.2 percent.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.