In this article, I will discuss five stocks which, in these times of financial uncertainty, have maintained sound financial results. Many people believe that these stocks have passed their prime, but I believe that these stocks are still valuable investments. I will analyze these five stocks on the basis of strong fundamentals and make recommendations to investors.
Apple Inc. (AAPL, Financial), the technology giant, designs, manufactures and markets computers, music players and other media devices. Its stock is currently trading around $493, just surpassing its 52-week high. It is the world's largest company with a market capitalization of $460 billion. Its revenue and earnings per share growth rates over the last five years are 39.67% and 57.81% respectively, whereas the industry’s five-year revenue growth has only been 11.5%. Apple's 12-month trailing gross and operating margins are at 42% and 34% respectively. Its current price to earnings ratio is 14 times. We believe Apple is still undervalued and its price will appreciate by next year. Its forward P/E ratio is 11.2 times with three-year expected future earnings per share of $84.48. It has no debt and pays no dividends.
However, Apple is still a value stock. Its competitor Microsoft (MSFT) has a market capitalization of $258 billion with a year-on-year quarterly revenue growth of 4.70% and a five-year earnings per share growth of only 15.17%, whereas Apple’s quarterly revenue growth is 73.3%. Not only has Apple surpassed Microsoft in terms of revenue, growth and market capitalization, Apple is still investing and growing. I recommend Apple to anyone who is willing to make a big investment.
Coach Inc. (COH, Financial) is an American marketer of accessories and gifts for men and women. The stock’s 52week range has been between $74.21 and $45.20, and is currently trading at $74 per share. The company’s market value is $21 billion with a 5-year average earnings per share growth rate of 13.75%. Coach beat all the analysts’ expectations regarding earnings last year, and the 2012 first quarter results are positive as well. Coach’s CEO believes that the company is on the right track and that the European financial problems are “not meaningful” to Coach. It has been able to beat all estimates, the European crises and even its competitors by posting positive results. Its 5-year average ROE and ROI are impressive at 44.7% and 44.3% respectively. Its current year gross margin is 75.3%. The only reservation I have is that its P/E ratio, which is around 23 times, makes the stock slightly expensive. Even then, I believe Coach is a great company, with good management, good returns and good margins. In comparison, tis competitor Ralph Lauren (RL) has a market capitalization of $15 billion and is trading at $172 with ROE and ROI five-year averages 16.4 and 14.3, respectively.
Google Inc. (GOOG, Financial), the web giant, primarily maintains an index of websites and other online content for users. The technology with its relatively new CEO is hungry for growth, and they are on the right track. Starting from a simple website, they have penetrated into different markets and are making gains as well. Google’s 70-20-10 model, which means that 10% of the money will be invested in startups, is one of the reasons I believe that Google earnings will remain steady and stable.
Google is not afraid to innovate. Its R&D expenditure is 1.5% of revenues, which is more than its sales and marketing expenditure. Its share is currently trading at around $611 and the company has a market capitalization of $198 billion. Its target price is $730 with a five-year sales growth rate of 26.25%. Google’s earnings per share five-year growth rate is 24.44%, while its year-on-year quarterly revenue growth has been more than 25% as well. Its 12-month trailing revenues were at $37.9 billion.
Yahoo Inc (YHOO), which is Google’s prime competitor, is nowhere near in comparison. Yahoo currently trades at $16, and has a market capitalization of $19.9 billion, a five-year sales growth rate of negative 4.66%, and a five-year earnings per share growth of 11%. With all the new projects coming up and a low forward earnings to price ratio of 12.29 times, I believe that buying Google stock right now will be a bargain.
Monster Beverage Corporation (MNST, Financial) manufactures, markets and distributes fruit juices, energy drinks and alternate beverages. The stock is trading at around $108 per share with its 52-week range being between $110.26 and $53.28. This is more than a 50% change in share value. The company’s Market capitalization is $9.4 billion with 5-year average sales and earnings per share growth rates of 16.36% and 18.59% respectively. Its current earnings per share stand at $2.90. I believe that it has a good growth potential in the US and also in the international market. Its current price to earnings ratio is 45.7 times, which I believe is too high for Monster Beverage indicating an expensive stock.
Having said that, we believe Monster has yet to explore the international market fully and has the potential to expand into an energy drink giant. The company’s gross profit margin average for five years is 53%, while ROE and ROI are both at 31%. PepsiCo Inc (PEP) is a competitor. Though PepsiCo is 10 times bigger than Monster Beverage, its year-on-year quarterly revenue growth is 13.3%, whereas Monster’s growth is 24.4%. PepsiCo’s share is trading for only $64. With an upside potential, I recommend Monster Beverage as a good buy.
Peabody Energy Corp (BTU, Financial) is the world's largest private sector coal company. It markets, brokers and trades coal throughout the world. The stock is currently trading at around $37, which is very close to its 52-week low of $30.60. Its 52-week high was $73.95. The company’s current earnings per share stand at $3.52 and it pays a dividend yield of $0.92. Next year is expected to see an increase of 39.71%. Its current P/E ratio is 10.05 times with a forward estimate of 7.88 times, and has a PEG ratio of 0.45 times, which clearly shows that the company is undervalued. Another important thing to note is that 63% of the transactions of the company are conducted by insiders, which sends a strong signal.
Peabody’s 12-month trailing gross margins and ROI are 28.60% and 12.50% respectively. Its nearest competitor is Arch Coal Inc. (ACI) which has a market capitalization of $3.3 billion, a P/E ratio of 21.4 times, and an earnings per share growth rate of negative 15.18. I believe that Peabody is an undervalued stock and buying it at the current value is recommended.
Apple Inc. (AAPL, Financial), the technology giant, designs, manufactures and markets computers, music players and other media devices. Its stock is currently trading around $493, just surpassing its 52-week high. It is the world's largest company with a market capitalization of $460 billion. Its revenue and earnings per share growth rates over the last five years are 39.67% and 57.81% respectively, whereas the industry’s five-year revenue growth has only been 11.5%. Apple's 12-month trailing gross and operating margins are at 42% and 34% respectively. Its current price to earnings ratio is 14 times. We believe Apple is still undervalued and its price will appreciate by next year. Its forward P/E ratio is 11.2 times with three-year expected future earnings per share of $84.48. It has no debt and pays no dividends.
However, Apple is still a value stock. Its competitor Microsoft (MSFT) has a market capitalization of $258 billion with a year-on-year quarterly revenue growth of 4.70% and a five-year earnings per share growth of only 15.17%, whereas Apple’s quarterly revenue growth is 73.3%. Not only has Apple surpassed Microsoft in terms of revenue, growth and market capitalization, Apple is still investing and growing. I recommend Apple to anyone who is willing to make a big investment.
Coach Inc. (COH, Financial) is an American marketer of accessories and gifts for men and women. The stock’s 52week range has been between $74.21 and $45.20, and is currently trading at $74 per share. The company’s market value is $21 billion with a 5-year average earnings per share growth rate of 13.75%. Coach beat all the analysts’ expectations regarding earnings last year, and the 2012 first quarter results are positive as well. Coach’s CEO believes that the company is on the right track and that the European financial problems are “not meaningful” to Coach. It has been able to beat all estimates, the European crises and even its competitors by posting positive results. Its 5-year average ROE and ROI are impressive at 44.7% and 44.3% respectively. Its current year gross margin is 75.3%. The only reservation I have is that its P/E ratio, which is around 23 times, makes the stock slightly expensive. Even then, I believe Coach is a great company, with good management, good returns and good margins. In comparison, tis competitor Ralph Lauren (RL) has a market capitalization of $15 billion and is trading at $172 with ROE and ROI five-year averages 16.4 and 14.3, respectively.
Google Inc. (GOOG, Financial), the web giant, primarily maintains an index of websites and other online content for users. The technology with its relatively new CEO is hungry for growth, and they are on the right track. Starting from a simple website, they have penetrated into different markets and are making gains as well. Google’s 70-20-10 model, which means that 10% of the money will be invested in startups, is one of the reasons I believe that Google earnings will remain steady and stable.
Google is not afraid to innovate. Its R&D expenditure is 1.5% of revenues, which is more than its sales and marketing expenditure. Its share is currently trading at around $611 and the company has a market capitalization of $198 billion. Its target price is $730 with a five-year sales growth rate of 26.25%. Google’s earnings per share five-year growth rate is 24.44%, while its year-on-year quarterly revenue growth has been more than 25% as well. Its 12-month trailing revenues were at $37.9 billion.
Yahoo Inc (YHOO), which is Google’s prime competitor, is nowhere near in comparison. Yahoo currently trades at $16, and has a market capitalization of $19.9 billion, a five-year sales growth rate of negative 4.66%, and a five-year earnings per share growth of 11%. With all the new projects coming up and a low forward earnings to price ratio of 12.29 times, I believe that buying Google stock right now will be a bargain.
Monster Beverage Corporation (MNST, Financial) manufactures, markets and distributes fruit juices, energy drinks and alternate beverages. The stock is trading at around $108 per share with its 52-week range being between $110.26 and $53.28. This is more than a 50% change in share value. The company’s Market capitalization is $9.4 billion with 5-year average sales and earnings per share growth rates of 16.36% and 18.59% respectively. Its current earnings per share stand at $2.90. I believe that it has a good growth potential in the US and also in the international market. Its current price to earnings ratio is 45.7 times, which I believe is too high for Monster Beverage indicating an expensive stock.
Having said that, we believe Monster has yet to explore the international market fully and has the potential to expand into an energy drink giant. The company’s gross profit margin average for five years is 53%, while ROE and ROI are both at 31%. PepsiCo Inc (PEP) is a competitor. Though PepsiCo is 10 times bigger than Monster Beverage, its year-on-year quarterly revenue growth is 13.3%, whereas Monster’s growth is 24.4%. PepsiCo’s share is trading for only $64. With an upside potential, I recommend Monster Beverage as a good buy.
Peabody Energy Corp (BTU, Financial) is the world's largest private sector coal company. It markets, brokers and trades coal throughout the world. The stock is currently trading at around $37, which is very close to its 52-week low of $30.60. Its 52-week high was $73.95. The company’s current earnings per share stand at $3.52 and it pays a dividend yield of $0.92. Next year is expected to see an increase of 39.71%. Its current P/E ratio is 10.05 times with a forward estimate of 7.88 times, and has a PEG ratio of 0.45 times, which clearly shows that the company is undervalued. Another important thing to note is that 63% of the transactions of the company are conducted by insiders, which sends a strong signal.
Peabody’s 12-month trailing gross margins and ROI are 28.60% and 12.50% respectively. Its nearest competitor is Arch Coal Inc. (ACI) which has a market capitalization of $3.3 billion, a P/E ratio of 21.4 times, and an earnings per share growth rate of negative 15.18. I believe that Peabody is an undervalued stock and buying it at the current value is recommended.
