Deal or No Deal: 6 Undervalued Stocks Reporting Earnings Next Week

Deal or No Deal: 6 Undervalued Stocks Reporting Earnings Next Week

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With earnings season in full swing we decided to look for undervalued stocks among the reports.

Earnings season is the time when the market hits some of its highest volatility. That's because it can sometimes be difficult for traders to keep up with all the new reports. Over one thousand companies on US exchanges are coming out with earnings next week.

Have no fear, we don't expect you to go through them all looking for growth potential. Your friends at Kapitall Wire are always happy to do the leg work. 

We decided to run a screen developed by one of the greatest investors of all time, the grandfather of value investing: Benjamin Graham. Graham believed in studying a company's balance sheet to find an "intrinsic value," and only investing if that value was higher than the current price. Those theories seem obvious today, but they provide the foundation on which modern security analysis rests.  

To determine the so-called "intrinsic value" of a stock, we look at a variety of factors including a company's size, earnings, debt, and costs. Graham invented a formula for this process to find what is now called the Graham Number. While it's a rough approximation, it is still built using Graham's favorite parameters: book value per share (BVPS), earnings per share (EPS), and the price to equity ratio (P/E).

To calculate a stock's Graham number we use the following formula:

Graham Number = Square Root of [ (22.5) x (Earnings Per Share) x (Book Value Per Share) ].

It's important to remember, however, that the Graham Number is still an estimate. Book value per share looks at a company's revenue, debt, and costs to determine something close to a "fair value," but you should never invest in a stock based on this number alone.

After screening stocks based on their Graham Number, we narrowed down our results to those seemingly undervalued companies that are reporting earnings next week.

Six stocks remained on our list.

Click on the interactive chart below to see one year returns over time.

Do you follow the investing strategies of Benjamin Graham? Use the list below as a starting point for your own analysis. 

1. Almost Family Inc. (AFAM, Earnings, Analysts, Financials): Provides home health services in the United States. Market cap at $178.26M, most recent closing price at $19.23.

Diluted TTM earnings per share at 1.45, and a MRQ book value per share value at 22.7, implies a Graham Number fair value = sqrt(22.5*1.45*22.7) = $27.21.

Based on the stock's price at $19.54, this implies a potential upside of 39.27% from current levels.  

Next Earnings Report: November 4.
 

 

2. Core Molding Technologies Inc. (CMT, Earnings, Analysts, Financials): Manufactures sheet molding compound (SMC), and molds fiberglass reinforced plastics primarily in the United States, Canada, and Mexico. Market cap at $77.43M, most recent closing price at $10.80.

Diluted TTM earnings per share at 0.88, and a MRQ book value per share value at 8.49, implies a Graham Number fair value = sqrt(22.5*0.88*8.49) = $12.97.

Based on the stock's price at $9.86, this implies a potential upside of 31.5% from current levels.

Next Earnings Report: November 4.

 

3. CPI Aerostructures Inc. (CVU, Earnings, Analysts, Financials): Engages in the contract production of structural and other aircraft parts for prime defense contractors, the United States Air Force, and other branches of the armed forces. Market cap at $102.8M, most recent closing price at $12.25.

Diluted TTM earnings per share at 1.17, and a MRQ book value per share value at 10.08, implies a Graham Number fair value = sqrt(22.5*1.17*10.08) = $16.29.

Based on the stock's price at $11.86, this implies a potential upside of 37.35% from current levels.  

Next Earnings Report: November 5

 

4. EMC Insurance Group Inc. (EMCI, Earnings, Analysts, Financials): Provides property and casualty insurance, and reinsurance products in the United States. Market cap at $443.87M, most recent closing price at $34.0.

Diluted TTM earnings per share at 3.23, and a MRQ book value per share value at 30.75, implies a Graham Number fair value = sqrt(22.5*3.23*30.75) = $47.27.

Based on the stock's price at $33.87, this implies a potential upside of 39.57% from current levels.

Next Earnings Report: November 7

 

5. Kulicke & Soffa Industries Inc. (KLIC, Earnings, Analysts, Financials): Designs, manufactures, and sells capital equipment and expendable tools used to assemble semiconductor devices, including integrated circuits, high and low powered discrete devices, light-emitting diodes, and power modules. Market cap at $990.04M, most recent closing price at $13.16.

Diluted TTM earnings per share at 1.27, and a MRQ book value per share value at 9.08, implies a Graham Number fair value = sqrt(22.5*1.27*9.08) = $16.11.

Based on the stock's price at $13.02, this implies a potential upside of 23.72% from current levels.

Next Earnings Report: November 7

 

6. The Mosaic Company (MOS, Earnings, Analysts, Financials): Engages in the production and marketing of concentrated phosphate- and potash-based crop nutrients for the agriculture industry worldwide. Market cap at $19.44B, most recent closing price at $45.64.

Diluted TTM earnings per share at 4.42, and a MRQ book value per share value at 31.53, implies a Graham Number fair value = sqrt(22.5*4.42*31.53) = $56.0.

Based on the stock's price at $46.61, this implies a potential upside of 20.14% from current levels.

Earnings: November 5

 

 

(List compiled by James Dennin. One year returns sourced from Zacks Investment Research, all other data sourced from Finviz.)

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