When analysts set target prices that are well-above a company’s closing price, they are either too optimistic or they were caught off-guard. When shares plunge, analysts may be late in revising their target prices. Bloomberg published a list of companies with the highest gap between the average target and the trading price.
Investors should not expect consensus calls to be correct, but companies below their target prices are a good way to look for trading opportunities.
Business Section: Investing Ideas
Companies outside of the technology sector (which was covered here) trading 50% or more below its target price are:
1. R.R. Donnelley & Sons Co. (RRD, Earnings, Analysts, Financials): The firm plunged even lower after the company mistakenly released quarterly earnings for Google (GOOG) early. Shares peaked in August at $13. The printing company, due to report earnings on November 1, beat consensus estimates last quarter. The company recently earned $0.49 per share on revenue of $2.5 billion.
2. Allegheny Technologies Inc. (ATI, Earnings, Analysts, Financials): Allegheny a metal fabrications company that reported quarterly earnings of $0.32, missing estimates by $0.07. Revenue was down 10% year-over-year at $1.22 billion, missing estimates by $80 million.
3. Apollo Group Inc. (APOL, Earnings, Analysts, Financials): Apollo Group shares dropped after the company reported revenue that missed consensus by $50 million. Apollo made $0.52 per share on revenue of $996.5 million.
4. Newfield Exploration Co. (NFX, Earnings, Analysts, Financials): Newfield Exploration is an oil and gas producer. The company reported earnings that were below consensus. Investors were nervous after Newfield said international oil volumes could be down by up to one-quarter next year.
5. Anadarko Petroleum Corp. (APC, Earnings, Analysts, Financials): Anadarko Petroleum is a joint owner in BP’s ill-fated Macondo well. The company is well-versed in oil exploration.
6. Denbury Resources Inc. (DNR, Earnings, Analysts, Financials): Denbury is nearly 29% below its 52-week high. The company is highly interested in old oilfields, which might explain its low valuation.
Charting
Below is a chart comparision of the first three companies:
…and the next three companies:
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Analyze These Ideas: Getting Started
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