Investors looking for opportunities among growing companies could be interested in the following stocks, as their share prices are trading lower than their Peter Lynch fair values.
The Peter Lynch fair value, which is based on the idea the fair price-earnings ratio for a growing company is on par with its growth rate, is derived from the combination of the following three components:
- The stock's PEG ratio.
- The stock's five-year Ebitda growth rate.
- The stock's earnings per share without non-recurring items for the trailing 12 months through the most recent quarter.
Zumiez
The first stock that meets the criteria is Zumiez Inc. (ZUMZ, Financial), a Lynnwood, Washington-based operator of specialty stores in North America and internationally, selling apparel, footwear, accessories and hardgoods related to skateboarding.
On Thursday, Zumiez's shares closed at $43.1, below its Peter Lynch fair value per share of $83.84, for a price-to-Peter Lynch fair value ratio of about 0.51. This ranks higher than 86.32% of the 234 companies that operate in the retail-cyclical industry.
The stock has a market capitalization of $1.11 billion after the share price recorded a 68% increase over the past year. The 52-week range is $20.87 to $52.
The stock has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 9 out of 10.
As of July, the stock has a median recommendation rating of overweight on Wall Street. The average target price is $54.20 per share.
Emergent BioSolutions
The second stock that qualifies is Emergent BioSolutions Inc. (EBS, Financial). Based in Gaithersburg, Maryland, the life sciences company focuses on products addressing public health threats, including vaccines against anthrax, cholera, typhoid and complications from a previous smallpox vaccination, as well as treatments for opioid overdose and medical devices to remove or neutralize chemical warfare agents. In addition, it offers products for the treatment and prophylaxis of inhalational anthrax and of botulinum disease. The company is also developing potential therapies for the treatment of Covid-19 and Influenza A infection in hospitalized patients. Lastly, it provides the pharmaceutical and biotechnology industries as well as government and non-government organizations with contract development and drug manufacturing services.
On Thursday, Emergent BioSolutions' stock closed at $63.7, which is well below the Peter Lynch fair value per share of $136.85, yielding a price-to-Peter Lynch fair value ratio of approximately 0.47. This ranks higher than 95% of the 243 companies that operate in the drug manufacturers industry.
The stock has a market capitalization of $3.41 billion following a 29.16% decrease that took place over the past year. The 52-week range is $55.07 to $137.61.
The stock has a GuruFocus financial strength rating of 6 out of 10 and a profitability rating of 9 out of 10.
As of July, the stock has a median recommendation rating of overweight on Wall Street and an average target price of $88.14 per share.
Eagle Bancorp Montana
The third stock to consider is Eagle Bancorp Montana (EBMT, Financial), a Helena, Montana-based regional bank serving small businesses and individuals through 23 branches and 26 automated teller machines.
On Thursday, Eagle Bancorp Montana’s shares closed at $22.4, below its Peter Lynch fair value per share of $26.99, for a price-to-Peter Lynch fair value ratio of about 0.83. This ranks higher than 72% of the 630 companies that operate in the banks industry.
The stock has a market capitalization of $152.04 million following a 47.05% increase over the past year. The 52-week range is $15.11 to $26.13.
The stock has a GuruFocus financial strength rating of 3 out of 10 and a profitability rating of 5 out of 10.
As of July, the stock has a median recommendation rating of buy with an average target price of $29 per share on Wall Street.
