Companies that have positive and steady net margins and operating margins are often good investments because they can return a solid profit to investors.
According to the GuruFocus discounted cash flow calculator as of June 25, the following undervalued companies have a high margin of safety and have grown their margins over a 10-year period.
Cognizant
Cognizant Technology Solutions Corp.'s (CTSH) net margin and operating margin have grown 13.49% and 17.93% per annum, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 7.74% margin of safety at $53.85 per share. The price-earnings ratio is 16.89. The share price has been as high as $73.50 and as low as $40.01 in the last 52 weeks; it is currently 24.90% below its 52-week high and 37.97% above its 52-week low.
The IT services provider has a market cap of $29.11 billion and an enterprise value of $28.23 billion.
The company's largest guru shareholder is Dodge & Cox with 4.38% of outstanding shares, followed by Al Gore (Trades, Portfolio) with 2.96% and Richard Pzena (Trades, Portfolio) with 1.64%.
T. Rowe Price
The net margin of T. Rowe Price Group Inc. (TROW) has grown 29.65% per annum over the past decade. The operating margin has grown 44.23%.
According to the DCF calculator, the stock is undervalued with a 24.55% margin of safety at $125.61 per share. The price-earnings ratio is 15.66. The share price has been as high as $139.82 and as low as $82.51 in the last 52 weeks; it is currently 10.16% below its 52-week high and 52.24% above its 52-week low.
The companywhich offers asset-management services has a market cap of $28.85 billion and an enterprise value of $27.19 billion.
The company's largest guru shareholder is Pioneer Investments (Trades, Portfolio) with 0.32% of outstanding shares, followed by Ron Baron (Trades, Portfolio) with 0.14% and Tom Gayner (Trades, Portfolio) with 0.14%.
Alexion
Alexion Pharmaceuticals Inc. (ALXN) has grown its net margin and operating margin by 17.12% and 33.85% per year, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 24.83% margin of safety at $115.49 per share. The price-earnings ratio is 10.88. The share price has been as high as $139.95 and as low as $72.67 in the last 52 weeks; it is currently 17.48% below its 52-week high and 58.92% above its 52-week low.
The company, which develops drugs for rare life-threatening medical conditions, has a market cap of $10.88 billion and an enterprise value of $25.77 billion.
The company's largest guru shareholder is Jim Simons (Trades, Portfolio)’ Renaissance Technologies with 1.70% of outstanding shares, followed by Pioneer Investments (Trades, Portfolio) with 0.32%, Steven Cohen (Trades, Portfolio)’s Point72 Asset Management with 0.29% and David Carlson (Trades, Portfolio) with 0.24%.
Cummins
The net margin of Cummins Inc. (CMI) has grown 8.58% per annum over the past decade. The operating margin has grown 10.33% annually over a 10-year period.
According to the DCF calculator, the stock is undervalued with an 2.62% margin of safety at $172.43 per share. The price-earnings ratio is 12.63. The share price has been as high as $186.73 and as low as $101.03 in the last 52 weeks; it is currently 7.66% below its 52-week high and 70.67% above its 52-week low.
The diesel engines manufacturer has a market cap of $25.37 billion and an enterprise value of $28.13 billion.
The company's largest guru shareholder is HOTCHKIS & WILEY with 2.12% of outstanding shares, followed by First Eagle Investment (Trades, Portfolio) with 1.49% and Bill Nygren (Trades, Portfolio)’s Oakmark Fund with 1%.
Simon Property
Simon Property Group Inc.'s (SPG) net margin and operating margin have grown 33.77% and 49.52% per year, respectively, over the past 10 years.
According to the DCF calculator, the stock is undervalued with a 54.11% margin of safety at $70.13 per share. The price-earnings ratio is 10.85. The share price has been as high as $374.99 and as low as $215.78 in the last 52 weeks; it is currently 19.92% below its 52-week high and 39.17% above its 52-week low.
The American real estate investment trust has a market cap of $21.44 billion and an enterprise value of $46.16 billion.
With 0.65% of outstanding shares, Barrow, Hanley, Mewhinney & Strauss is the company's largest guru shareholder, followed by Pioneer Investments (Trades, Portfolio) with 0.54%.
Disclosure: I do not own any stocks mentioned.
Read more here:
- 5 Real Estate Companies Trading With Low Price-Earnings Ratios
- 4 Predictable Stocks With a Margin of Safety
- 5 Insurance Stocks Beating the Market
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