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 12, the following undervalued companies have a high margin of safety and have grown their margins over a 10-year period.
Comcast
Comcast Corp.'s (CMCSA) net margin and operating margin have grown 10.86% and 20.92% per annum, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 43.82% margin of safety at $39.25 per share. The price-earnings ratio is 15.58. The share price has been as high as $47.74 and as low as $31.71 in the last 52 weeks; it is currently 17.78% below its 52-week high and 23.78% above its 52-week low.
The provider of internet access and owner of TV networks has a market cap of $179 billion and an enterprise value of $275 billion.
The company's largest guru shareholder is Dodge & Cox with 1.81% of outstanding shares, followed by First Eagle Investment (Trades, Portfolio) with 0.71% and Andreas Halvorsen (Trades, Portfolio)’s Viking Global Investors with 0.39%.
Innospec
The net margin of Innospec Inc. (IOSP) has grown 8.69% per annum over the past decade, while the operating margin has grown 10.72% per annum.
According to the DCF calculator, the stock is undervalued with a 29.13% margin of safety at $74.08 per share. The price-earnings ratio is 15.69. The share price has been as high as $107.85 and as low as $56.71 in the last 52 weeks; it is currently 31.31% below its 52-week high and 30.63% above its 52-week low.
The manufacturer of chemicals has a market cap of $1.82 billion and an enterprise value of $1.84 billion.
The company's largest guru shareholder is Chuck Royce (Trades, Portfolio) with 2.83% of outstanding shares, followed by Jeremy Grantham (Trades, Portfolio) with 1.14% and Pioneer Investments (Trades, Portfolio) with 0.27%.
Encore Capital
Encore Capital Group Inc. (ECPG) has grown its net margin and operating margin by 9.84% and 27.06% per year, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 31.45% margin of safety at $34.91 per share. The price-earnings ratio is 10.18. The share price has been as high as $40.16 and as low as $15.27 in the last 52 weeks; it is currently 13.07% below its 52-week high and 128.62% above its 52-week low.
The specialty finance company has a market cap of $1.09 billion and an enterprise value of $4.31 billion.
The company's largest guru shareholder is Grantham with 0.61% of outstanding shares, followed by Jim Simons (Trades, Portfolio)’ Renaissance Technologies with 0.20% and Barrow, Hanley, Mewhinney & Strauss with 0.08%.
Canadian Pacific Railway
The net margin of Canadian Pacific Railway Ltd. (CP) has grown 21.22% per annum over the past decade, while the operating margin has grown 36.73% annually.
According to the DCF calculator, the stock is undervalued with an 33.54% margin of safety at $246.97 per share. The price-earnings ratio is 19.32. The share price has been as high as $275.13 and as low as $173.26 in the last 52 weeks; it is currently 10.24% below its 52-week high and 42.54% above its 52-week low.
The railroad operator has a market cap of $34 billion and an enterprise value of $41.23 billion.
The company's largest guru shareholder is Steve Mandel (Trades, Portfolio)’s Lone Pine Capital with 1.68%, followed by Pioneer Investments (Trades, Portfolio) with 0.07% and Renaissance Technologies with 0.05%.
Grifols
Grifols SA's (GRFS) net margin and operating margin have grown 12.95% and 23.22% per year, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 15.23% margin of safety at $19.48 per share. The price-earnings ratio is 28.02. The share price has been as high as $25.73 and as low as $13.40 in the last 52 weeks; it is currently 24.29% below its 52-week high and 45.37% above its 52-week low.
The producer of plasma derivates has a market cap of $13.33 billion and an enterprise value of $14.47 billion.
With 0.34% of outstanding shares, George Soros (Trades, Portfolio)’ fund is the company's largest guru shareholder, followed by Steven Cohen (Trades, Portfolio)’s Point72 Asset Management with 0.06%.
Disclosure: I do not own any stocks mentioned.
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