When screening the market for value opportunities, one method is to pick stocks whose trailing 12-month price-to-free cash flow ratios are low compared to that of the S&P 500 Index, which stands at around 13.18 currently.
Thus, investors may want to consider the following stocks as they meet the above criteria and are recommended by sell-side analysts on Wall Street.
Cigna
The first stock to consider is Cigna Corp. (CI, Financial), a Bloomfield, Connecticut-based health care plans company.
Cigna's price-to-free cash flow ratio is 9.92 as of April 16, ranking higher than 53% of 19 companies that operate in the health care plans industry.
The free cash flow per share for the trailing 12 months ended in December was $25.47, growing 13% over the past year.
Thanks to a 33.85% increase that occurred over the past year, the stock traded at $252.57 per share at close on Friday for a market capitalization of $87.74 billion and a 52-week range of $158.84 to $255.89.
Currently, the company is paying quarterly dividends to its shareholders, with the most recent payment of $1 per common share made on March 25. The payment generates a forward dividend yield of 1.58% as of Friday.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength and 7 out of 10 to its profitability.
On Wall Street, the stock has a median recommendation rating of buy with an average target price of $268.39 per share.
Humana
The second stock investors may want to consider is Humana Inc. (HUM, Financial), a Louisville, Kentucky-based health care plans company.
Humana's price-to-free cash flow ratio is 12.39 as of April 16, ranking higher than 58% of 19 companies that operate in the health care plans industry.
The company's free cash flow per share for the trailing 12 months ended in December stood at $35.13. The free cash flow increased by 4.10% over the past year.
Due to an 18.5% increase that occurred over the past year, the stock traded at $435.28 per share at close on Friday for a market capitalization of $56.16 billion and a 52-week range of $301.29 to $474.7.
Currently, the company is paying quarterly dividends to its shareholders, with the next payment of 70 cents per common share to be issued on April 30. The payment produces a forward dividend yield of 0.64% as of April 16.
GuruFocus assigned a score of 6 out of 10 to the company's financial strength and 8 out of 10 to its profitability.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $476.55 per share.
Laboratory Corp of America
The third stock to consider is Laboratory Corp of America Holdings (LH, Financial), a Burlington, North Carolina-based independent clinical laboratory company.
LabCorp's price-to-free cash flow ratio is 14.66 as of April 16, ranking higher than 80% of 111 companies that operate in the medical diagnostics and research industry.
The company's free cash flow per share for the trailing 12 months ended in December was 17.88 cents. The free cash flow grew 68.90% over the past year.
As a result of an 80.07% increase over the past year, the stock was trading at $262.2 per share at close on Friday for a market capitalization of $25.60 billion and a 52-week range of $119.04 to $263.08.
The company is currently not paying dividends.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength and 9 out of 10 to its profitability.
On Wall Street, the stock has a median recommendation rating of buy with an average target price of $273.36 per share.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Undervalued Stocks to Consider
- 3 Stocks Trading Below Intrinsic Value Estimates
- 3 Stock Picks for a 'Buy and Hold' Approach
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