7 Rallying Services Stocks Undervalued By The Graham Number

7 Rallying Services Stocks Undervalued By The Graham Number

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Do you consider yourself a value investor? Consider looking for value in the services sector, which consists of names in electronics wholesale, rental & leasing services, railroads, retail, management services, and airlines.

Companies in our list below have had a positive performance in the last month, and still appear undervalued. Perhaps it's time to invest in the services sector considering the U.S. economy is showing some signs of growth. We created a screen with this in mind.

We began by screening the services sector for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages, indicating that these stocks have strong upward momentum.

We then screened for those stocks 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.

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

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

 

1. Avnet Inc. (AVT, Earnings, Analysts, Financials): Distributes electronic components, enterprise computer and storage products, and embedded subsystems in the Americas, Europe, the Middle East, Africa, Asia, Australia, and New Zealand. Market cap at $4.86B, most recent closing price at $35.38. Diluted TTM earnings per share at 3.61, and a MRQ book value per share value at 30.02, implies a Graham Number fair value = sqrt(22.5*3.61*30.02) = $49.38. Based on the stock's price at $35.46, this implies a potential upside of 39.26% from current levels. The stock is currently trading 11% above its 20-day moving average, 16% above its 50-day moving average, and 14% above its 200-day moving average. Performance last month at 15%.
 

 

2. Aircastle LTD (AYR, Earnings, Analysts, Financials): Engages in the acquisition, lease, and sale of high-utility commercial jet aircraft to passenger and cargo airlines worldwide. Market cap at $920.57M, most recent closing price at $13.20. Diluted TTM earnings per share at 0.54, and a MRQ book value per share value at 19.99, implies a Graham Number fair value = sqrt(22.5*0.54*19.99) = $15.58. Based on the stock's price at $13.12, this implies a potential upside of 18.78% from current levels. The stock is currently trading 3% above its 20-day moving average, 8% above its 50-day moving average, and 13% above its 200-day moving average. Performance last month at 6%.
 

 

3. CAI International Inc. (CAP, Earnings, Analysts, Financials): Engages in the intermodal marine cargo container leasing business worldwide. Market cap at $527.15M, most recent closing price at $24.17. Diluted TTM earnings per share at 2.99, and a MRQ book value per share value at 14.37, implies a Graham Number fair value = sqrt(22.5*2.99*14.37) = $31.09. Based on the stock's price at $24.54, this implies a potential upside of 26.7% from current levels. The stock is currently trading 4% above its 20-day moving average, 11% above its 50-day moving average, and 17% above its 200-day moving average. Performance last month at 14%.
 

 

4. EZCORP, Inc. (EZPW, Earnings, Analysts, Financials): Provides credit services to people who lack the cash or access to credit to meet short-term needs. Market cap at $1.17B, most recent closing price at $22.79. Diluted TTM earnings per share at 2.62, and a MRQ book value per share value at 17.5, implies a Graham Number fair value = sqrt(22.5*2.62*17.5) = $32.12. Based on the stock's price at $23.47, this implies a potential upside of 36.85% from current levels. The stock is currently trading 8% above its 20-day moving average, 14% above its 50-day moving average, and 1% above its 200-day moving average. Performance last month at 15%.
 

 

5. Greenbrier Companies (GBX, Earnings, Analysts, Financials): Engages in the design, manufacture, and marketing of railroad freight car equipment in North America and Europe. Market cap at $516.34M, most recent closing price at $18.99. Diluted TTM earnings per share at 1.78, and a MRQ book value per share value at 16.44, implies a Graham Number fair value = sqrt(22.5*1.78*16.44) = $25.66. Based on the stock's price at $19.27, this implies a potential upside of 33.16% from current levels. The stock is currently trading 9% above its 20-day moving average, 6% above its 50-day moving average, and 16% above its 200-day moving average. Performance last month at 15%.
 

 

6. ICF International Inc. (ICFI, Earnings, Analysts, Financials): Provides management, technology, and policy consulting and implementation services to government, commercial, and international clients. Market cap at $457.2M, most recent closing price at $23.41. Diluted TTM earnings per share at 1.88, and a MRQ book value per share value at 21.33, implies a Graham Number fair value = sqrt(22.5*1.88*21.33) = $30.04. Based on the stock's price at $22.8, this implies a potential upside of 31.74% from current levels. The stock is currently trading 2% above its 20-day moving average, 6% above its 50-day moving average, and 6% above its 200-day moving average. Performance last month at 1%.
 

 

7. JetBlue Airways Corporation (JBLU, Earnings, Analysts, Financials): Provides passenger air transportation services in the United States. Market cap at $1.77B, most recent closing price at $6.23. Diluted TTM earnings per share at 0.47, and a MRQ book value per share value at 6.69, implies a Graham Number fair value = sqrt(22.5*0.47*6.69) = $8.41. Based on the stock's price at $6.35, this implies a potential upside of 32.46% from current levels. The stock is currently trading 1% above its 20-day moving average, 8% above its 50-day moving average, and 17% above its 200-day moving average. Performance last month at 9%.
 

 

 

(List compiled by Sabina Bhatia)

 

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