In order to have a higher chance to unearth bargains, investors may want to look for stocks that are trading at a discount to their intrinsic value according to 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 irregular and may include losses in some quarters. The projected FCF uses normalized free cash flow and book value.
Thus, investors may want to consider the below listed securities, as they are undervalued according to the projected FCF model and have also received optimistic recommendation ratings from sell-side analysts on Wall Street.
eBay Inc
The first stock that makes the cut is eBay Inc (EBAY, Financial).
The San Jose, California-based e-commerce platform operator traded at a price of $56.29 per share at close on Friday, which represents a nearly 10% discount to the projected FCF of $61.73.
The share price has risen by 39.4% over the past year, determining a market capitalization of $39.40 billion and a 52-week range of $26.02 to $61.06.
GuruFocus has assigned a positive score of 5 out of 10 for the company's financial strength and a high score of 8 out of 10 for its profitability.
eBay Inc holds an overweight recommendation rating on Wall Street with an average target price of $61.31 per share.
Vornado Realty Trust
The second stock that meets the above listed criteria is Vornado Realty Trust (VNO, Financial), a New York-based real estate investment trust company focusing on office and retail properties in the New York City metropolitan area and Chicago.
The stock traded at a price of $35.58 per share at close on Friday, which represents a 48% discount to the projected FCF of $68.28.
The share price has lost 42% in the past year for a market capitalization of $6.8 billion and a 52-week range of $27.64 to $68.68.
GuruFocus has assigned a moderate score of 4 out of 10 for the company's financial strength and a positive score of 6 out of 10 for its profitability.
Wall Street sell-side analysts issued a hold recommendation rating for the stock and have established an average target price of $41.55 per share.
Points International Ltd
The third stock that qualifies is Points International Ltd (PCOM, Financial), a Canadian provider of e-commerce and technology services solutions to loyalty program operators in the U.S. and internationally.
The stock traded at a price of $10.94 per share at close on Friday, reflecting a nearly 3% discount to the projected FCF of $11.23.
The stock price has declined 9.72% over the past year, determining a market capitalization of $145.84 million and a 52-week range of $6.89 to $19.06.
GuruFocus has assigned a positive score of 6 out of 10 for the company's financial strength and a high score of 8 out of 10 for its profitability.
Wall Street recommends an overweight rating with an average target price of $14.30 per share for the stock.
Disclosure: I have no positions in any security mentioned in this article.
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