When screening the market for bargain opportunities, investors may want to consider the following three securities, as they look underestimated on the market. Their trailing 12-month and forward price-earnings to growth ratios are not exceeding 1.5, a value that, as of July 29, approximately matches with the S&P 500's historical average value.
The PEG ratio is calculated as the price-earnings ratio without non-recurring items divided by the five-year Ebitda growth rate. For the financial stocks, the five-year Book Value growth rate is used instead.
For all sectors’ stocks, the forward PEG ratio is calculated as the price-earnings ratio without NRI divided by the future earnings per share growth rate, which is a projection for the next five years.
Wall Street sell-side analysts have also issued positive recommendation ratings for these stocks, which means they have expectations for improved share prices over the coming months.
Virtus Investment Partners Inc
The first company that makes the cut is Virtus Investment Partners Inc (VRTS, Financial), a Hartford, Connecticut-based asset management company.
As of July 29, Virtus Investment Partners has a share price of $274.06, a price-earnings ratio of 18.17, a historical five-year Ebitda growth rate of 37.90% and an estimated future five-year earnings growth rate of 34.20%. Thus, the trailing 12-month PEG ratio is 0.48 and the forward PEG ratio is 0.53.
After the share price has increased by 101.63% over the past year, the market capitalization now stands at $2.10 billion and the 52-week range is $129.35 to $300.53.
GuruFocus assigned a score of 3 out of 10 for the company's financial strength and 9 out of 10 for its profitability.
On Wall Street as of July, the stock has a median recommendation rating of overweight with an average target price of $365.50 per share.
Banco Macro SA
The second company that qualifies is Banco Macro SA (BMA, Financial), a Buenos Aires, Argentina-based regional provider of various banking products and services to consumers and businesses in Argentina.
As of July 29, Banco Macro SA has a share price of $14.06, a price-earnings ratio of 8.11, a past five-year book value growth rate of 50.30% and an estimated future five-year earnings growth rate of 24.74%. Thus, the trailing 12-month PEG ratio is 0.2 and the forward PEG ratio is 0.33.
Following a 34% fall over the past year, the market capitalization is $898.43 million and the 52-week range is $11.45 to $26.79.
GuruFocus assigned a score of 4 out of 10 for the company's financial strength and 6 out of 10 for its profitability.
On Wall Street as of July, the stock has a median recommendation rating of hold with an average target price of $20.94 per share.
Central Puerto S.A.
The third company that meets the criteria is Central Puerto S.A. (CEPU, Financial), a Buenos Aires, Argentina-based owner and operator of five thermal, hydroelectric and wind generation plants for a total capacity of 4,709 MW. The company provides the electric power and steam to households, businesses and public entities in Argentina.
As of July 29, Central Puerto S.A. has a share price of $2.55, a price-earnings ratio of 11.36, a past five-year Ebitda growth rate of 72.20% and an estimated future five-year earnings per share growth rate of 36.30%. Thus, the trailing 12-month PEG ratio is 0.16 and the forward PEG ratio is 0.31.
Following a 4.12% decrease over the past year, the market capitalization is $383.83 million and the 52-week range is $1.90 to $3.05.
GuruFocus assigned a score of 4 out of 10 to the company's financial strength rating and 8 out of 10 to its profitability.
On Wall Street as of July, the stock has a median recommendation rating of hold with an average target price of $8.07 per share.
Disclosure: I have no positions in any security mentioned.
