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In this edition of Watchlist Wednesday, we highlight five mid-cap stocks with low enterprise multiples, as displayed on the Enterprise Multiple screen.
The enterprise multiple is a price ratio discussed at length in investing books such as What Works On Wall Street, Quantitative Value, and Deep Value.
The screen finds undervalued, out-of-favor stocks that are ripe for activist takeovers.
Enterprise Multiple Description
This metric measures a company’s valuation based on its enterprise value to EBIT, rather than the more common ratio of market capitalization to net earnings.
Where market capitalization is the value of a business’s equity, enterprise value includes equity plus debtless cash. It is the cost to acquire the entire company. EBIT is earnings before interest and taxes.
Using EBIT in place of net earnings provides a clearer picture of a company’s operating profits. By not including interest or taxes, the metric compares the operational structure of the business, rather than letting a company’s financing and tax statuses affect its profitability.
At The Stock Market Blueprint, we consider a mid-cap stock to be any stock with a market cap between $1 billion and $10 billion.
5 Mid-Cap Stocks With Low Enterprise Multiples
Here is a breakdown of five mid-cap stocks with low enterprise multiples according to TheStockMarketBlueprint.com:
Greenbrier Companies Inc. (GBX, Financial)
The Greenbrier Companies Inc. designs, manufactures and markets railroad freight car equipment in North America and Europe. The company operates in the following segments: Manufacturing, Wheel and Parts, Leasing and Services and a GBW Joint Venture segment.
The Greenbrier Companies Inc. was founded in 1974 and is headquartered in Lake Oswego, Oregon.
- Market Capitalization: $1.02 Billion
- Enterprise Value: $1.25 Billion
- EBIT (TTM): $449 Million
- Enterprise Multiple: 2.79
Five Prime Therapeutics Inc. (FPRX, Financial)
Five Prime Therapeutics Inc. is a clinical-stage biotechnology company which focuses on the discovery and development of protein therapeutics that block cancer and inflammatory disease processes in the United States.
The company was founded in 2001 and is headquartered in South San Francisco, California.
- Market Capitalization: $1.33 Billion
- Enterprise Value: $848 Million
- EBIT (TTM): $278 Million
- Enterprise Multiple: 3.05
Cal-Maine Foods Inc. (CALM, Financial)
Cal-Maine Foods Inc. produces, grades, packages, markets and distributes eggs. It offers specialty eggs, such as nutritionally enhanced, cage free, organic and brown eggs under the Egg-Lands Best, Land O Lakes, Farmhouse and 4-Grain brand names, as well as under private labels.
Cal-Maine Foods Inc. was founded in 1957 and is based in Jackson, Mississippi.
- Market Capitalization: $2.01 Billion
- Enterprise Value: $1.64 Billion
- EBIT (TTM): $470 Million
- Enterprise Multiple: 3.49
United Therapeutics Corp. (UTHR, Financial)
United Therapeutics Corporation is a biotechnology company which develops and commercializes medications for patients with chronic and life-threatening diseases worldwide.
United Therapeutics Corporation was founded in 1996 and is headquartered in Silver Spring, Maryland.
- Market Capitalization: $5.90 Billion
- Enterprise Value: $4.96 Billion
- EBIT (TTM): $1.19 Billion
- Enterprise Multiple: 4.16
First Solar Inc. (FSLR, Financial)
First Solar Inc. provides solar energy solutions in the United States and internationally. It operates through two segments, Components and Systems.
The Components segment designs, manufactures and sells solar modules that convert sunlight into electricity. The Systems segment provides turn-key PV solar power systems or solar solutions.
First Solar Inc. was founded in 1999 and is headquartered in Tempe, Arizona.
- Market Cap: $4.91 Billion
- Enterprise Value: $3.33 Billion
- EBIT (TTM): $752 Million
- Enterprise Multiple: 4.42
Implementation
Due to the nature of deep value strategies such as the enterprise multiple, average investors will find numerous reasons not to buy the above stocks.
Disciplined investors, on the other hand, will find success following a simple investment strategy such as the enterprise multiple.
The Shadow Stock Portfolios on The Stock Market Blueprint provide real-world examples for investors wanting to implement systematic strategies using the stock screens featured on the site.
Disclosure:Â I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Mitchell Mauer is the Founder of TheStockMarketBlueprint.com. The Stock Market Blueprint is a site that finds value stocks for investors building long-term wealth. The site’s investment philosophy is anchored in principles established by Benjamin Graham and his most reputable followers over the last 100 years.
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