Deal or No Deal: 6 Stocks Under 5 Dollars Trading Below Book Value

Deal or No Deal: 6 Stocks Under 5 Dollars Trading Below Book Value

Research  these Stocks on Kapitall’s Playground Now

 
research now

We screened stocks under 5 dollars using the Graham Number for all you value investors out there.

Stocks were slightly down this morning after a strong rally over the last week. Trading spiked in the S&P 500 as it seemed like a record five days of straight gains was drawing to a close. Part of the problem today stems from lukewarm earnings reports from major firms like Caterpillar (CAT)

Read more about deals under $5 from Kapitall here. 

Considering the volatility in the markets over the last month or so, we decided to run a screen for growth stocks that might make good value investments.

Value investors often look for stocks that are trading down after bad news causes a temporary deflation in the stock price. Value investments are typically stocks expected to rise in fair value, and there are numerous ways to determine whether a stock will go up.

One way to do so is by determining the stock's Graham Number.

Benjamin Graham was one of Wall St.'s greatest thinkers. After graduating from Columbia University, at the age of 20, he had offers to join the college from three different departments: English, Mathematics, and Philsosophy. However he decided to take a job on Wall Street where he excelled. 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. 

Things have gotten a lot easier since Benjamin Graham's day. We now have a measurement for the so-called "intrinsic value" of a stock. And 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.

As Graham often said, the market is unpredictable, so all you can control is your behavior. 

That being said, we ran a similar screen in 2011, which has returned 25% annually from a group of six stocks. 

So it seems like the Graham number is still a pretty good place to start. Consider our list below of six stocks under $5 undervalued by Graham Number.

Click on the interactive chart to view analyst ratings over time. 

Do you see investing opportunities in these six undervalued stocks? Use the list below as a starting point for your own analysis. 

1. Amkor Technology, Inc. (AMKR, Earnings, Analysts, Financials): Provides outsourced semiconductor packaging and test services in the United States and internationally. Market cap at $1.03B, most recent closing price at $4.73.

Diluted TTM earnings per share at 0.35, and a MRQ book value per share value at 4.11, implies a Graham Number fair value = sqrt(22.5*0.35*4.11) = $5.69.

Based on the stock's price at $4.73, this implies a potential upside of 21.56% from current levels.
 

 

2. Alliance One International, Inc. (AOI, Earnings, Analysts, Financials): Engages in purchasing, processing, storing, and selling leaf tobacco to cigarette manufacturers and other consumer tobacco products worldwide. Market cap at $269.29M, most recent closing price at $2.89.

Diluted TTM earnings per share at 0.2, and a MRQ book value per share value at 3.46, implies a Graham Number fair value = sqrt(22.5*0.2*3.46) = $3.95.

Based on the stock's price at $2.93, this implies a potential upside of 33.76% from current levels.
 

 

3. Full House Resorts Inc. (FLL, Earnings, Analysts, Financials): Develops, manages, invests in, and owns gaming-related enterprises. Market cap at $54.16M, most recent closing price at $2.96.

Diluted TTM earnings per share at 0.14, and a MRQ book value per share value at 4.39, implies a Graham Number fair value = sqrt(22.5*0.14*4.39) = $3.72.

Based on the stock's price at $2.96, this implies a potential upside of 26.49% from current levels.
 

 

4. Skilled Healthcare Group, Inc. (SKH, Earnings, Analysts, Financials): Operates skilled nursing facilities, assisted living facilities, hospices, home health providers, and a rehabilitation therapy business. Market cap at $169.89M, most recent closing price at $4.33.

Diluted TTM earnings per share at 0.43, and a MRQ book value per share value at 2.7, implies a Graham Number fair value = sqrt(22.5*0.43*2.7) = $5.11.

Based on the stock's price at $4.33, this implies a potential upside of 15.63% from current levels.  
 

 

5. TeleCommunication Systems Inc. (TSYS, Earnings, Analysts, Financials): Develops and applies secure mobile communication technology in the United States and internationally. Market cap at $149.72M, most recent closing price at $2.55.

Diluted TTM earnings per share at 0.18, and a MRQ book value per share value at 2.76, implies a Graham Number fair value = sqrt(22.5*0.18*2.76) = $3.34.

Based on the stock's price at $2.55, this implies a potential upside of 34.81% from current levels. 
 

 

6. Warren Resources Inc. (WRES, Earnings, Analysts, Financials): Engages in the exploration, development, and production of onshore crude oil and gas reserves in the United States. Market cap at $230.04M, most recent closing price at $3.15.

Diluted TTM earnings per share at 0.26, and a MRQ book value per share value at 2.85, implies a Graham Number fair value = sqrt(22.5*0.26*2.85) = $4.08.

Based on the stock's price at $3.15, this implies a potential upside of 25.25% from current levels.
 

 

 

(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research. All other data sourced from Finviz.)

Analyze These Ideas: Getting Started

Dig Deeper: Access Company Snapshots, Charts, Filings

ABOUT US

© Kapitall, Inc. All rights reserved. Kapitall Wire is a division of Kapitall, Inc. Kapitall Generation, LLC is a wholly owned subsidiary of Kapitall, Inc.

Kapitall Wire offers free cutting edge investing ideas, intended for educational information purposes only. It should not be construed as an offer to buy or sell securities, or any other product or service provided by Kapitall Inc., and its affiliate companies.

Open a free account today get access to virtual cash portfolios, cutting-edge tools, stock market insights, and a live brokerage platform through our affiliated company, Kapitall Generation, LLC. 

Securities products and services are offered by Kapitall Generation, LLC - a FINRA/SIPC member. 

playfor100kwirebanner2png

Leave a Reply

Protected by WP Anti Spam

wirebannerscompetepng