4 Stocks Reporting This Week Undervalued by The Graham Number

4 Stocks Reporting This Week Undervalued by The Graham Number

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We're at the tail end of earnings season but that doesn't mean we're out of opportunity. There are plenty of potentially undervalued names itching to surprise analysts with higher than expected earnings. To help you find names likely to report to the upside we put together a list of potentially undervalued stocks reporting earnings this week. [More ideas: 3 Tech Stocks Reporting Earnings to Watch This Week]

Building The List

To create the list below we created a universe of stocks with market caps above $50 million and share price above $1 (for sustainability) that are reporting earnings later this week. May 21-24.  

We screened that universe for those that appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing" Benjamin Graham.

It is based on a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15 and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

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Do you think these names are truly undervalued and ready to surprise? Use this list as a starting point for your own analysis.

Interactive chart: Compare average analyst ratings for the stocks mentioned below. Press play to see how ratings changed over the past two years. Click through for more free tools. 

1. International Bancshares Corporation (IBOC, Earnings, Analysts, Financials): Provides commercial and retail banking services in south, central, and southeast Texas; and Oklahoma. Market cap at $1.45B, most recent closing price at $21.57.

Reporting on 05/22/13.

Diluted TTM earnings per share at 1.39, and a MRQ book value per share value at 21.36, implies a Graham Number fair value = sqrt(22.5*1.39*21.36) = $25.85. Based on the stock's price at $21.57, this implies a potential upside of 19.83% from current levels.
 

2. Spartan Stores Inc. (SPTN, Earnings, Analysts, Financials): Operates as a grocery distributor and grocery retailer principally in Michigan and Indiana. Market cap at $373.45M, most recent closing price at $17.17.

Reporting on 05/22/13.

Diluted TTM earnings per share at 1.37, and a MRQ book value per share value at 15.14, implies a Graham Number fair value = sqrt(22.5*1.37*15.14) = $21.60. Based on the stock's price at $17.17, this implies a potential upside of 25.82% from current levels.
 

3. Apollo Investment Corporation (AINV, Earnings, Analysts, Financials): Operates as a closed-end management investment company. Market cap at $1.77B, most recent closing price at $8.73.

Reporting on 05/23/13.

Diluted TTM earnings per share at 0.77, and a MRQ book value per share value at 8.14, implies a Graham Number fair value = sqrt(22.5*0.77*8.14) = $11.88. Based on the stock's price at $8.73, this implies a potential upside of 36.03% from current levels.
 

4. Perry Ellis International Inc. (PERY, Earnings, Analysts, Financials): Engages in designing, sourcing, marketing, and licensing apparel products for men and women in the United States and internationally. Market cap at $297.75M, most recent closing price at $19.41.

Reporting on 05/23/13.

Diluted TTM earnings per share at 0.97, and a MRQ book value per share value at 24.75, implies a Graham Number fair value = sqrt(22.5*0.97*24.75) = $23.24. Based on the stock's price at $19.41, this implies a potential upside of 19.74% from current levels.
 

 

(List compiled by Rebecca Lipman)

 

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