From my watch list, these three companies are undervalued based on the Peter Lynch Price Value.
1) Terra Nitrogen Co LP (TNH)
Description: The Company's main products are anhydrous ammonia and urea ammonium nitrate solutions "UAN", manufactured at its facility in Verdigris, Oklahoma. It conducts its operations through an operating partnership, Terra Nitrogen, Limited Partnership. It produces and distributes nitrogen products, which are used mainly by farmers to improve the yield and quality of their crops.
Ratios:TNH has a ROC of about 174%, a ROA of 108% and a ROE of 121%. All ratios are better then 99% of others Global Agricultural Inputs competitors and these returns are not that easy to find all over the market.
Nevertheless, these ratios are not the best TNH ever had so far. The company can do even better and all these info are enough to put this stock in your portfolio.
Financials: The company has No Debts and never had debts so far. Financial strenght is 9 out of 10.
Growth: Over the last five years, the company had a steady and strong growth rate (per share).
| Revenue | +11% |
| EBITDA | +39% |
| Free Cash Flow | +33% |
| BookValue | +23% |
| EPS | +19% |
Is Worth to spend some words about growth of the last 12 months.
Revenue : -16%, EBITDA : -25%, FCF : -30%
This situation partially justify the current and for sure temporary "undervalued" condition of this stock.
Price: The stock is trading at about $123. The Peter Lynch value gives a price of $322. The stock is undervalued by 162%. The DCF value gives a price of $366.
Currently, the price is facing a long lasting down-trend that started in April 2014. Down 28% from its 52-week high and up 36% from its 52-week low.
The 200-days Moving Average price is $137
Technically, the price bounced against a support at 90$ and now is going to test a resistance at 135/136$ that worked well in the past.
Dividend Yield: TNH has a dividend yield of 8.10%. with a 5 year growth rate of 24%.
Only bad news is the Dividend Payout Ratio of 79% so the company gives 79% of its earnings to shareholders as Dividend. This percentage is a little bit higher so is the only negative point I see for this company.
2) Sturm Ruger & Co Inc. (RGR)
Description: The Company offers products in four industry product categories - rifles, shotguns, pistols, and revolvers. The Company's firearms are sold through independent wholesale distributors, principally to the commercial sporting market. The Company manufactures and sells investment castings made from steel alloys for both outside customers and internal use in the firearms segment. Investment castings sold to outside customers, either directly to or through manufacturers' representatives.
Ratios: Sturm Ruger & Co ratios are better then 99% of Global Aerospace & Defense competitors with a ROE of 42%, a ROA of 29% and a ROC (based on Joel Greenblatt (Trades, Portfolio) view) of 96%
Financials: What I always have a look at while watching for a company financial strenght is the Debt raw. RGR has No Debts and a long track of years without any debt.
Growth: Over the last five years, the company had a steady growth rate (per share).
| Revenue | +27% |
| EBITDA | +41% |
| BookValue | +10% |
| EPS | +43% |
We have to take a look at the last 12 months.
As undermentioned, the price dropped of 47% on the last 12 months. This is partially explained in a big drob of performances on the last 12 months.
(growth per share). Revenue -7%, EBITDA -15%, EPS -24%, Free Cash Flow -80%
Everything is justified and the company is really a good buy.
Price: The stock is trading at about $39. The Peter Lynch Value gives a price of $100. The DCF value gives a price of $114.
Currently, the price is down 49% from its 52-week high and up 17% from its 52-week low.
The price is facing a downward trend since January 2014.
Dividend Yeld: TGA has an amazing dividend yeld of 4.10% . It grew 69% since 5 years ago.
3) Herbalife Ltd (HLF, Financial)
Description: The Company distributes and sells its products through a network of independent distributors, using the direct selling channel. As of December 31, 2012, it sold its products in 88 countries to and through a network of approximately 3.2 million independent distributors.
Ratios: Herbalife Ltd has good ratios. A ROC of 161%, a Return on Equity of 732% and a Return on Assets of 13%. These results are better then 95% of Global Household & Personal Products
Financials: The company has a financial strength of 8 out of 10 but has few cash compared to Debts.
Growth: Over the last five years, the company had an amazing growth rate (per share).
| Revenue | +25% |
| EBITDA | +28% |
| BookValue | +11% |
On the last 12 months, results are not that good, especially the book value that had a drop of 215%. As you can read below, the price dropped much on the last 12 months so some ratios had to give us an answer for that.
Price: The stock is trading at about $30. The Peter Lynch value gives a price of $80. The DCF value gives a price of $49.
Currently, the price is down 57% from its 52-week high and up 10% from its 52-week low.
The average price of the last 200 days is at $50.
Technically, the down trend lasts since the beginning of 2014 and to choose the right time to enter is not easy but is worth to keep an eye on it.
Dividend Yeld: HLF has a small Dividend Yeld of 1%
Summarizing the 3 stocks:
| Â | TNH | RGR | HLF |
| ROC | 174% | 96% | 161% |
| ROA | 108% | 29% | 13% |
| ROE | 121% | 42% | 732% |
| Compared to Industry (better then) | 99% | 99% | 95% |
| Â | Â | Â | Â |
| Cash to Debt | No Debts | No Debts | 0.37 |
| Â | Â | Â | Â |
| Revenue Growth (5y) | 11% | 27% | 25% |
| EBITDA Growth (5y) | 39% | 41% | 28% |
| BookValue Growth (5y) | 20% | 10% | 11% |
| Â | Â | Â | Â |
| Current Price | 120$ | 39$ | 30$ |
| Peter-Lynch Price | 322$ (+168%) | 100$ (+156%) | 80$ (+166%) |
| DCF Price | 366$ (+205%) | 114$ (+192%) | 49$ (+63%) |
| 52-Weeks High | -28% | -49% | -57% |
| 52-Weeks Low | +36% | +17% | +10% |
| Trend | Down | Down | Down |
| Â | Â | Â | Â |
| Dividend Yeld | 8,10% | 4,10% | 1% |
TNH is the most undervalued of the 3 stocks and also has a Dividend Yeld of 8%. What really matter is to keep an eye open on both 3 companies. Every investment now is good but I think we can wait for the downward trend to stop and the upward to start.
Read more about me at TheExtraIncome
