logo
  Join        Login             Stock Quote

Value Expert Eyes PEG Profits

 January 02, 2013 02:04 PM
 


by J. Royden Ward, editor Cabot Benjamin Graham Value Letter

Twenty-seven years ago, Standard & Poor's created the PEG ratio to measure the degree to which a growth stock is undervalued. The PEG is calculated by dividing the p/e ratio by the sum of the earnings growth rate and dividend yield. A PEG under 1.00 indicates a stock is undervalued.

To find undervalued stocks, I calculated the PEG ratios for the 1,000 companies contained in our Benjamin Graham database. The three stocks featured below should produce exceptional returns during the next six to 12 months.

BlackRock (BLK) is the largest publicly traded investment management company in the world, with assets under management totaling $3.7 trillion. The 2009 acquisition of Barclays Global Investors, manager of all iShare ETFs, doubled revenues and added significant profits.

[Related -Sector Detector: Is There Still Enough Fuel In The Bulls’ Tank?]

BlackRock is best known for its expertise in fixed income asset management. The company has been gaining market share, aided by its size and untarnished reputation in the marketplace.

Its asset and risk management products are designed to help banks and governments to reduce risk and liquidate troubled assets, particularly those in Europe and Asia, such as Greek debt.

Sales and earnings growth slowed during the past 12 months, but a rebound is under way. Sales will likely rise 9% and EPS will increase 11% in 2013.

[Related -Nordstrom, Inc. (JWN) Q3 Earnings Preview: What To Expect?]

BLK shares are undervalued with a PEG ratio of 0.98. BLK is low risk, share price volatility is below average, and the dividend yield is attractive at 3.0%. Buy now.

National Oilwell Varco (NOV) manufactures systems and components used in the oil and gas drilling industry. More than 90% of the mobile offshore drilling rigs manufactured in the past 20 years use drilling components manufactured by National.

Oil and natural gas companies are focusing on oil drilling and placing less emphasis on natural gas drilling because of the low prices and profits of natural gas. The switchover is creating new demand for National's products and services.

Revenues and earnings will probably increase 13% in 2013. The acquisition of Robbins & Myers might boost sales and earnings further.

The stock sells at a very reasonable PEG ratio of 0.72. NOV pays a dividend yielding 0.8%, is medium risk, and share volatility is above average. Buy now.

Nordstrom (JWN) was founded in 1901 as a retail shoe business in Seattle,Washington. Today, the company is a leading mid-to-high-end retailer of national and exclusive private-branded apparel, shoes, accessories and cosmetics.

The company plans to add one new Nordstrom store and 15 new Rack stores -- its discount outlet -- before 1/31/13. Future new store openings will be driven by Rack, reflecting company plans to increase locations from 119 stores to over 230 stores by 2016.

Sales will likely increase 9% and earnings will rise 12% in 2013. The company's highly profitable Rack outlet stores could provide an additional boost to sales and earnings growth.

JWN shares are reasonably priced at 15.3 times current EPS with a dividend yield of 2.2%, but I advise waiting for the stock price to decrease to my maximum buy price of $51.33 before buying. JWN shares are medium risk with average volatility. The PEG ratio is modest at 0.97.

iOnTheMarket Premium
Advertisement

Advertisement


Post Comment -- Login is required to post message
Name:  
Alert for new comments:
Your email:
Your Website:
Title:
Comments:
 

rss feed

Latest Stories

article imageFord Motor Company (F): A long Road to Deutsche Bank’s $19 Target

Ford Motor Company (NYSE:F) is going the right way on a one way street where most everybody else is driving read on...

article imageCitigroup Inc (C) Q1 Earnings Preview: Too Many Parts Heading South

Citigroup Inc (NYSE:C) will issue its first quarter results via press release at approximately 8 a.m. (ET) read on...

article imageFacebook Inc (FB): You Might Not Like It Today, But You’ll Like It Tomorrow

Do you honestly want to invest in stocks right now? It sure looks like the bull market is at least on read on...

article imageJPMorgan Chase & Co. (JPM) Q1 Earnings Preview: Regulation Costs To Trim Guidance?

JPMorgan Chase & Co. (NYSE:JPM) will host a conference call to review first quarter 2014 financial results read on...

Advertisement
Popular Articles

Advertisement
Daily Sector Scan
Partner Center



Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.