Companies that have positive and steady net margins and operating margins are often good investments because they can frequently return a solid profit to investors.
According to the GuruFocus discounted cash flow (DCF) calculator as of June 5, the following undervalued companies have a high margin of safety and have grown their margins over a 10-year period.
AutoZone
AutoZone Inc.'s (AZO) net margin and operating margin have grown 11.34% and 19.02% per annum, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 19.84% margin of safety at $1,138.05 per share. The price-earnings ratio is 18.40. The share price has been as high as $1,274.41 and as low as $684.91 in the last 52 weeks; it is currently 10.51% below its 52-week high and 66.52% above its 52-week low.
The company, which provides automotive parts, tools and accessories, has a market cap of $26.67 billion and an enterprise value of $34.70 billion.
The company's largest guru shareholder is Tweedy Browne (Trades, Portfolio) with 0.44% of outstanding shares, followed by Louis Moore Bacon (Trades, Portfolio) with 0.16% and Jim Simons (Trades, Portfolio)’ Renaissance Technologies with 0.15%.
O'Reilly Automotive
The net margin of O'Reilly Automotive Inc. (ORLY) has grown 11.24% per annum over the past decade, while the operating margin has grown 18.26% per annum.
According to the DCF calculator, the stock is undervalued with a 17% margin of safety at $418 per share. The price-earnings ratio is 23.24. The share price has been as high as $454.31 and as low as $251.22 in the last 52 weeks; it is currently 7.58% below its 52-week high and 66.93% above its 52-week low.
The retailer has a market cap of $30.72 billion and an enterprise value of $36.88 billion.
The company's largest guru shareholder is Chuck Akre (Trades, Portfolio) with 2.48% of outstanding shares, followed by Pioneer Investments (Trades, Portfolio) with 1.22% and Andreas Halvorsen (Trades, Portfolio)’s Viking Global Investors with 0.90%.
NetEase
NetEase Inc. (NTES) has grown its net margin and operating margin by 38.22% and 36.88% per year, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 43.92% margin of safety at $396.07 per share. The price-earnings ratio is 16.24. The share price has been as high as $40.2.07 and as low as $209.01 in the last 52 weeks; it is currently 1.46% below its 52-week high and 89.55% above its 52-week low.
The Chinese online services provider has a market cap of $50.99 billion and an enterprise value of $44.69 billion.
The company's largest guru shareholder is Renaissance Technologies with 0.73% of outstanding shares, followed by Ken Fisher (Trades, Portfolio) with 0.35% and Pioneer Investments (Trades, Portfolio) with 0.34%.
Credit Acceptance
The net margin of Credit Acceptance Corp. (CACC) has grown 36.95% per annum over the past decade, while the operating margin has grown 67.62% annually.
According to the DCF calculator, the stock is undervalued with an 36.64% margin of safety at $389.65 per share. The price-earnings ratio is 18.21. The share price has been as high as $509.99 and as low as $199 in the last 52 weeks; it is currently 24.09% below its 52-week high and 94.54% above its 52-week low.
The company, which specializes in automobile loans, has a market cap of $6.91 billion and an enterprise value of $11.73 billion.
The company's largest guru shareholder is Ruane Cunniff (Trades, Portfolio) with 6.43% of outstanding shares, followed by Simons’ firm with 0.19% and Jeremy Grantham (Trades, Portfolio) with 0.17%.
Amerco
Amerco Inc.'s (UHAL) net margin and operating margin have grown 11.36% and 18.15% per year, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 45.37% margin of safety at $323.91 per share. The price-earnings ratio is 14.39. The share price has been as high as $426.5 and as low as $222.34 in the last 52 weeks; it is currently 23.77% below its 52-week high and 46.23% above its 52-week low.
The company, which provides rental trucks to household movers, has a market cap of $6.36 billion and an enterprise value of $10.59 billion.
With 2.86% of outstanding shares, David Abrams (Trades, Portfolio) is the company's largest guru shareholder, followed by HOTCHKIS & WILEY with 1.20% and Yacktman Asset Management (Trades, Portfolio) with 1.13%.
Disclosure: I do not own any stocks mentioned.
Read more here:
- Insiders Roundup: Avid Technology, Nebula
- 5 Predictable Stocks With a Margin of Safety
- 5 Industrial Stocks Beating the Market
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