The holy grail of investors is to buy low and sell high, but if it was as easy as that everyone would be retired to their own private island in the Caribbean. Still, there are lots of opportunities in today's market. I looked at five companies to see if their current stock prices are a bargain when compared to their expected future prospects over the next year. Here is what I found:
First in line for this screen is Green Mountain Coffee Roasters, Inc (GMCR, Financial), which weighs in with a recent stock price of about $65 within its 52-week trading range of $34.06-$115.98. It has a $10 billion market capitalization, earnings per share of $1.94 for a price to earnings ratio of 33.71 and a price to earnings growth ratio of 1.487. GMCR pays no dividend. Green Mountain was a fair-haired child of the market with its share price flying from under $20 in 2010 to its top in September 2011 before widely publicized comments from hedge fund investor David Einhorn questioned the accuracy of the company's reported earnings. Green Mountain's earnings seem to have checked out, the furor has died down and investors are slowly returning to the fold, as evidenced in the rebound of the stock price to current levels. The company remains a hard core growth stock and, barring any surprises, should return to its $100+ level this year, presenting a great buying opportunity now.
CISCO Systems (CSCO, Financial): the $107 billion market cap network technology force has a recent price near $20 towards the higher end of its $13.30-$20.49 52-week trading range. It lists its earnings per share as $1.28 for a price to earnings ratio of 15.65 which gives it an attractive price to earnings growth ratio of 0.780. It now pays a $0.24 annualized dividend that produces a 1.20% yield. Cisco is rated low by the market now because the company has a 60% strangle hold on the router market and no one, including management at CISCO, seems to know where it goes from here. However Cisco is an earnings monster and almost has to be recognized for its low price. This is a great buy for value now, but the payoff may not be until 2013 or later.
Next is pharmaceutical maker Pfizer Inc (PFE, Financial) which has had a recent share price near $21 and a market capitalization of $163 billion and a 52-week stock trading range of $16.63-$22.17. The company's earnings per share are reported at $1.28 in the trailing twelve months for a price to earnings ratio of 16.64 and an uncomfortably high price to earnings growth ratio of 3.841. Pfizer pays an annualized dividend of $0.88 for a juicy 4.13% yield. A high dividend yield and a high price to earnings growth almost always signals the market is expecting a dive. In fact Pfizer will have earnings plummet in the next three years as a number of its medical patents expire. There is not enough in the research pipeline to replace the lost revenue Pfizer will experience so this is definitely a stock to avoid until at least 2015.
Mighty Apple, Inc (AAPL, Financial) is the big boy of the bunch with a $467 billion market capitalization off of a recent share price of around $502 and near the top of its 52-week trading range of $310.50-$509.56. In fact, the company briefly popped above a market capitalization of half a trillion dollars in early February when it ran up near $100 a share inside of two weeks. Earnings per share lists at $35.11 for a price to earnings ratio of 14.32 and a price to earnings growth ratio of 1.223. It has no debt and a $9.8 billion dollar war chest to purchase companies. Apple is not cheap, so it is really not a "buy low sell high" stock. It is a momentum stock and should go much higher in the short term - think buy high sell higher. The company is rolling right now and is a market darling. However the first negative event that bursts a bubble of expectation will send this stock shrieking to the floor. There is profit to be made here, but the last one out pays for the check.
Our final company to discuss is Hewlett-Packard Company (HPQ, Financial), which has a $56 billion market capitalization off a recent share price near $29 in a 52-week trading range of $21.50-$49.12. Its Earnings per share are a robust $3.27 over the trailing twelve months for a tiny price to earnings ratio of 8.79 and an even more attractive price to earnings growth ratio of 0.523. It pays an annualized dividend of $0.48 for a current yield of 1.65%. The company just announced a joint venture with NVidia (NVDA) to develop new PC designs. Both companies should see a steady rise over the next few years, especially Hewlett-Packard since the stock valuation is already very low. This is a great buy for both short term and long term investors.
In the final analysis, Green Valley Roasters looks like the best for the "Buy Low Sell High" investor based on its proven earnings momentum and the correction of late 2011 providing a good entrance price. For very conservative investors then Hewlett-Packard is a good option since its bargain-basement price is overlooking good earnings performance. I think that only the greatest risk takers should catch a ride with Apple right now.
First in line for this screen is Green Mountain Coffee Roasters, Inc (GMCR, Financial), which weighs in with a recent stock price of about $65 within its 52-week trading range of $34.06-$115.98. It has a $10 billion market capitalization, earnings per share of $1.94 for a price to earnings ratio of 33.71 and a price to earnings growth ratio of 1.487. GMCR pays no dividend. Green Mountain was a fair-haired child of the market with its share price flying from under $20 in 2010 to its top in September 2011 before widely publicized comments from hedge fund investor David Einhorn questioned the accuracy of the company's reported earnings. Green Mountain's earnings seem to have checked out, the furor has died down and investors are slowly returning to the fold, as evidenced in the rebound of the stock price to current levels. The company remains a hard core growth stock and, barring any surprises, should return to its $100+ level this year, presenting a great buying opportunity now.
CISCO Systems (CSCO, Financial): the $107 billion market cap network technology force has a recent price near $20 towards the higher end of its $13.30-$20.49 52-week trading range. It lists its earnings per share as $1.28 for a price to earnings ratio of 15.65 which gives it an attractive price to earnings growth ratio of 0.780. It now pays a $0.24 annualized dividend that produces a 1.20% yield. Cisco is rated low by the market now because the company has a 60% strangle hold on the router market and no one, including management at CISCO, seems to know where it goes from here. However Cisco is an earnings monster and almost has to be recognized for its low price. This is a great buy for value now, but the payoff may not be until 2013 or later.
Next is pharmaceutical maker Pfizer Inc (PFE, Financial) which has had a recent share price near $21 and a market capitalization of $163 billion and a 52-week stock trading range of $16.63-$22.17. The company's earnings per share are reported at $1.28 in the trailing twelve months for a price to earnings ratio of 16.64 and an uncomfortably high price to earnings growth ratio of 3.841. Pfizer pays an annualized dividend of $0.88 for a juicy 4.13% yield. A high dividend yield and a high price to earnings growth almost always signals the market is expecting a dive. In fact Pfizer will have earnings plummet in the next three years as a number of its medical patents expire. There is not enough in the research pipeline to replace the lost revenue Pfizer will experience so this is definitely a stock to avoid until at least 2015.
Mighty Apple, Inc (AAPL, Financial) is the big boy of the bunch with a $467 billion market capitalization off of a recent share price of around $502 and near the top of its 52-week trading range of $310.50-$509.56. In fact, the company briefly popped above a market capitalization of half a trillion dollars in early February when it ran up near $100 a share inside of two weeks. Earnings per share lists at $35.11 for a price to earnings ratio of 14.32 and a price to earnings growth ratio of 1.223. It has no debt and a $9.8 billion dollar war chest to purchase companies. Apple is not cheap, so it is really not a "buy low sell high" stock. It is a momentum stock and should go much higher in the short term - think buy high sell higher. The company is rolling right now and is a market darling. However the first negative event that bursts a bubble of expectation will send this stock shrieking to the floor. There is profit to be made here, but the last one out pays for the check.
Our final company to discuss is Hewlett-Packard Company (HPQ, Financial), which has a $56 billion market capitalization off a recent share price near $29 in a 52-week trading range of $21.50-$49.12. Its Earnings per share are a robust $3.27 over the trailing twelve months for a tiny price to earnings ratio of 8.79 and an even more attractive price to earnings growth ratio of 0.523. It pays an annualized dividend of $0.48 for a current yield of 1.65%. The company just announced a joint venture with NVidia (NVDA) to develop new PC designs. Both companies should see a steady rise over the next few years, especially Hewlett-Packard since the stock valuation is already very low. This is a great buy for both short term and long term investors.
In the final analysis, Green Valley Roasters looks like the best for the "Buy Low Sell High" investor based on its proven earnings momentum and the correction of late 2011 providing a good entrance price. For very conservative investors then Hewlett-Packard is a good option since its bargain-basement price is overlooking good earnings performance. I think that only the greatest risk takers should catch a ride with Apple right now.
