To increase your chances of discovering value opportunities, one method is to screen the market for stocks with lower trailing 12-month price-to-free cash flow ratios than that of the S&P 500 Index, which stands at around 13.47 as of the time of writing.
Therefore, investors could be interested in the following stocks, as they meet the above criteria and are recommended by sell-side analysts on Wall Street.
BHP Group
The first stock investors could be interested in is BHP Group PLC (BBL, Financial), an Australian miner that also has oil and gas assets.
BHP Group’s price-to-free cash flow ratio is about 8.25, ranking higher than 68% of 358 companies that operate in the metals and mining industry.
The free cash flow per share for the trailing 12 months ended June 2021 stood at $7.94.
Following a 13.57% increase over the past year, the stock closed at $65.87 per share on Thursday for a market capitalization of $164.92 billion and a 52-week range of $49.50 to $68.05.
The company pays semi-annual dividends. The last payment of $4 per share was made on Sept. 21.
On Wall Street, the stock has a median recommendation rating of hold with an average target price of approximately $62.50 per share.
Vale
The second stock investors could be interested in is Vale SA (VALE, Financial), a Brazilian producer and seller of iron ore and iron ore pellets to steel companies.
Vale's price-to-free cash flow ratio is 3.03, ranking higher than 91% of the 358 companies that operate in the metals and mining industry.
The company's free cash flow per share for the trailing 12 months ended in September 2021 was $4.98.
Following a 14.14% decrease that occurred over the past year, the stock was trading at $15.3 per share at close on Thursday for a market capitalization of $70.86 billion and a 52-week range of $11.16 to $23.18.
The company pays quarterly dividends. The last payment of $1.51 per share was made on Oct. 8.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $16.78 per share.
McKesson
The third stock investors could be interested in is McKesson Corp. (MCK, Financial), an Irving, Texas-based supplier of medical treatments and equipment in the U.S. and internationally.
McKesson’s price-to-free cash flow ratio is about 9.80, ranking higher than 72% of 46 companies that operate in the medical distribution industry.
The company's free cash flow per share for the trailing 12 months ended in September 2021 was $25.93.
Increasing 37.75% over the past year, the stock closed at $254.75 per share on Thursday for a market capitalization of $38.67 billion and a 52-week range of $169.34 to $256.85.
The company pays quarterly dividends. The last payment of 47 cents per share was made on Jan. 3.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $282.38 per share.
