The following is a list of undervalued stocks, as determined by the Price to Free Cash Flow (P/FCF) ratio. All of the stocks mentioned below have P/FCF ratios below 5, which means that free cash flow makes up more than 20% of the each stock's valuation.
In addition, all of these stocks have solid management teams, as defined by the return on asset, return on investment and return on equity ratios. Based on average ratios over the past five years, all of these management teams have outperformed their competitors.
Considering the track record of the management teams listed below, are these stocks worth a closer look? Full details below.
P/FCF data sourced from Finviz, management data sourced from Reuters.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research. Note: The numbers on top of items represent the forward P/E ratio, if available.
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The list has been sorted by the P/FCF ratio.
1. Advance America, Cash Advance Centers Inc. (AEA): Credit Services Industry. Market cap of $354.25M. P/FCF ratio at 2.9. 5-year average return on assets at 12.38% vs. industry average at 2.01%. 5-year average return on investments at 14.48% vs. industry average at 2.08%. 5-year average return on equity at 21.91% vs. industry average at 17.88%. Short float at 2.4%, which implies a short ratio of 4.15 days. The stock has gained 7.95% over the last year.
2. Brookfield Homes Corp. (BHS): Residential Construction Industry. Market cap of $303.42M. P/FCF ratio at 2.96. 5-year average return on assets at 3.77% vs. industry average at 2.31%. 5-year average return on investments at 4.7% vs. industry average at 4.12%. 5-year average return on equity at 14.93% vs. industry average at 9.65%. Short float at 2.55%, which implies a short ratio of 23.5 days. The stock has gained 21.64% over the last year.
3. AmSurg Corp. (AMSG): Hospitals Industry. Market cap of $663.45M. P/FCF ratio at 3.25. 5-year average return on assets at 15.92% vs. industry average at 3.32%. 5-year average return on investments at 18.33% vs. industry average at 4.29%. 5-year average return on equity at 11.38% vs. industry average at 5.99%. Short float at 5.75%, which implies a short ratio of 14.53 days. The stock has lost -1.92% over the last year.
4. Humana Inc. (HUM): Health Care Plans Industry. Market cap of $9.57B. P/FCF ratio at 4.07. 5-year average return on assets at 6.26% vs. industry average at 0.47%. 5-year average return on investments at 11.13% vs. industry average at 0.04%. 5-year average return on equity at 18.38% vs. industry average at 5.84%. Short float at 2.56%, which implies a short ratio of 2.41 days. The stock has gained 19.62% over the last year.
5. ITT Educational Services Inc. (ESI): Education & Training Services Industry. Market cap of $2.06B. P/FCF ratio at 4.37. 5-year average return on assets at 30.88% vs. industry average at 7.04%. 5-year average return on investments at 58.58% vs. industry average at 9.59%. 5-year average return on equity at 103.46% vs. industry average at 13.92%. Short float at 23.2%, which implies a short ratio of 9.34 days. The stock has lost -35.5% over the last year.
6. World Acceptance Corp. (WRLD): Credit Services Industry. Market cap of $825.22M. P/FCF ratio at 4.59. 5-year average return on assets at 12.05% vs. industry average at 2.01%. 5-year average return on investments at 12.91% vs. industry average at 2.08%. 5-year average return on equity at 21.33% vs. industry average at 17.88%. Short float at 26.19%, which implies a short ratio of 21 days. The stock has gained 37.89% over the last year.
7. PH Glatfelter Co. (GLT): Paper & Paper Products Industry. Market cap of $553.53M. P/FCF ratio at 4.68. 5-year average return on assets at 4.73% vs. industry average at 1.83%. 5-year average return on investments at 5.57% vs. industry average at 2.6%. 5-year average return on equity at 12.88% vs. industry average at 5.01%. Short float at 5.14%, which implies a short ratio of 12.62 days. The stock has lost -8.77% over the last year.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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