If you want to increase your likelihood to come across bargains, one way is to screen the market for stocks that are likely trading at discount to their intrinsic value.
In this article, I have used the intrinsic value estimate that comes from the projected free cash flow (FCF) valuation model. Unlike the discounted cash flow or discounted earnings valuation models, the projected FCF model can apply to companies whose history of revenue and earnings is not regular. The projected FCF makes use of normalized free cash flow and book value.
The following stocks look undervalued according to the projected FCF model and also hold positive recommendation ratings amid Wall Street sell side analysts.
Olympic Steel Inc
The first stock that qualifies is Olympic Steel Inc ZEUS.
The Bedford Heights, Ohio-based steel company was trading at a price of $10.28 per share at close on Tuesday, which represents a 66% discount to the projected FCF of $30.28.
The share price has declined nearly 15% over the past year, determining a market capitalization of $114.8 million and a 52-week range of $7.74 to $18.41.
GuruFocus has assigned a positive score of 5 out of 10 for both the company’s financial strength and its profitability.
Olympic Steel Inc holds an overweight recommendation rating with an average target price of $11 per share on Wall Street.
MRC Global Inc
The second stock that meets the above listed criteria is MRC Global Inc MRC, a Houston, Texas-based supplier of equipment and services to the oil and gas industry.
The stock was trading at a price of $6.22 per share at close on Tuesday, reflecting a 78% discount to the projected FCF of $28.14.
The share price lost 61.4% in the past year for a market capitalization of $495.25 million and a 52-week range of $3.31 to $18.91.
GuruFocus has assigned a positive score of 5 out of 10 for both the company’s financial strength and its profitability.
Wall Street sell-side analysts issued an overweight recommendation rating with an average target price of $7.25 per share.
US Concrete Inc
The third stock that makes the cut is US Concrete Inc USCR, an Euless, Texas-based producer and seller of ready-mixed concrete and related products to North American building companies.
The stock was trading at a price of $25.18 per share at close on Tuesday, representing a 70% discount to the projected FCF of $84.23.
The stock price has fallen 47.2% over the past year, determining a market capitalization of $433.14 million and a 52-week range of $6.75 to $56.22.
GuruFocus has assigned a low score of 3 out of 10 for the company’s financial strength and a positive score of 5 out of 10 for its profitability.
Wall Street recommends a hold rating with an average target price of $24.13 per share for this stock.
Disclosure: I have no positions in any security mentioned in this article.
Read more here:
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