4 Undervalued Stocks Reporting Next Week with Short Covering

Looking for potentially undervalued stocks? Enjoy trading on earnings season reports? If so, we have a list you might enjoy.

Starting with a universe of stock reporting earnings next week (Oct 22-26):

Step 1: Using the wisdom on Warren Buffett’s mentor, Benjamin Graham, the Godfather of Value investing, we applied the “Graham Number” to find potentially undervalued stocks.

The Graham Number as a calculation for the maximum fair-value price of a stock. It is based on its earnings per share (EPS) and book value per share, and stocks trading significantly below their Graham Number are considered to be undervalued.

The Graham Number = Square Root of (22.5) x (TTM EPS) x (MRQ Book Value per Share).

Step 2: Search for optimism (or decreased pessimism) from short sellers. Short sellers win when share price falls. Short sellers avoid being damaged too much from a faulty bet by “covering” the short, meaning they buy back stock in anticipation that share price will increase. When a stock is seeing increased covering from short sellers it’s seen as a bullish indicator.

We screened for stocks with a decrease in shares shorted month over month.

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The following 4 stocks meet all these criteria:

- Earnings reports between Oct 22 and Oct 26
- Short decrease month over month.
- Undervalued by the Graham Number

Do you think short sellers are right that these stocks are undervalued? Do you think they will beat expectations in their earnings report next week? Use this list as a starting point for your own analysis.

Other articles about stocks reporting earnings next week: Rebound Candidates: Small Cap Stocks Reporting Next Week and 9 Stocks Reporting Earnings Next Week with Insider Buying

Interactive Chart: Use the Compar-O-Matic to compare analyst ratings for the stocks mentioned below:

1. Community Bank System Inc. (CBU, Earnings, Analysts, Financials): Operates as the holding company for Community Bank, N. Market cap at $1.09B, most recent closing price at $27.60. Shares shorted have decreased from 3.57M to 3.16M over the last month, a decrease which represents about 1.09% of the company’s float of 37.48M shares. Days to cover ratio at 21.84 days. Diluted TTM earnings per share at 2.06, and a MRQ book value per share value at 22.42, implies a Graham Number fair value = sqrt(22.5*2.06*22.42) = $32.24. Based on the stock’s price at $27.5, this implies a potential upside of 17.22% from current levels. Earnings date: Oct 22.

2. Helix Energy Solutions Group, Inc. (HLX, Earnings, Analysts, Financials): Operates as an offshore energy company. Market cap at $2.04B, most recent closing price at $19.40. Shares shorted have decreased from 6.11M to 4.54M over the last month, a decrease which represents about 1.6% of the company’s float of 98.01M shares. Days to cover ratio at 5.64 days. Diluted TTM earnings per share at 1.63, and a MRQ book value per share value at 14.68, implies a Graham Number fair value = sqrt(22.5*1.63*14.68) = $23.20. Based on the stock’s price at $18.52, this implies a potential upside of 25.29% from current levels. Earnings date: Oct 22.

3. US Airways Group, Inc. (LCC, Earnings, Analysts, Financials): Provides air transportation for passengers and cargo. Market cap at $1.89B, most recent closing price at $11.62. Shares shorted have decreased from 27.68M to 25.50M over the last month, a decrease which represents about 1.47% of the company’s float of 148.17M shares. Days to cover ratio at 3.48 days. Diluted TTM earnings per share at 2.52, and a MRQ book value per share value at 3.15, implies a Graham Number fair value = sqrt(22.5*2.52*3.15) = $13.36. Based on the stock’s price at $11.36, this implies a potential upside of 17.64% from current levels.Earnings date: Oct 24.

4. Monster Worldwide, Inc. (MWW, Earnings, Analysts, Financials): Provides online employment solutions worldwide. Market cap at $908.39M, most recent closing price at $7.68. Shares shorted have decreased from 25.52M to 24.32M over the last month, a decrease which represents about 1.11% of the company’s float of 108.25M shares. Days to cover ratio at 6.81 days. Diluted TTM earnings per share at 0.42, and a MRQ book value per share value at 9.85, implies a Graham Number fair value = sqrt(22.5*0.42*9.85) = $9.65. Based on the stock’s price at $7.56, this implies a potential upside of 27.62% from current levels. Earnings date: Oct 22.

Written by Rebecca Lipman. Data sourced from Yahoo Finance and Finviz.

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