Value investors may want to consider the following securities, as they have low price-sales ratios, high profitability and robust financial conditions. These three aspects result in a great likelihood that these securities could be value opportunities.
Big Lots Inc
The first company investors may want to consider is Big Lots Inc (BIG, Financial), a Columbus, Ohio-based owner and operator of a discount stores in the U.S.
The stock traded at a price of $44.60 per share at close on Sept. 30 for a price-sales ratio of 0.3, which appeals more than the industry median of 0.42 and the S&P 500's price-sales ratio of 2.39.
Big Lots Inc has a GuruFocus profitability rating of 6 out of 10, driven by an operating margin of 5.8% (versus the industry median of 2.8%) and a net margin of 12.3% (versus the industry median of 1.5%). The return on equity (ROE) ratio is 80.9% (versus the industry median of 6.9%) and the return on total assets (ROA) ratio is 20.9% (versus the industry median of 2.57%). Furthermore, the return on capital (ROC) ratio (as defined by Joel Greenblatt) is 40.6% (versus the industry median of 10.3%).
The company has received a high GuruFocus financial strength rating of 8 out of 10. The rating is driven by a debt-to-Ebitda ratio of 1.54 (compared to the industry median of 3.44) and an interest coverage ratio of 23.44 (compared to the industry median of 7.69).
After a 102% increase over the past year, the stock has a market capitalization of $1.75 billion and a 52-week range of $10.13 to $57.24.
Wall Street sell-side analysts recommend an overweight rating for this stock and have established an average target price of $56.38 per share.
Renewable Energy Group Inc
The second company value investors may want to consider is Renewable Energy Group Inc (REGI, Financial), an Ames, Iowa-based global producer, purchaser and (re)seller of biomass-based diesel, petroleum-based diesel and renewable identification numbers.
The stock traded at a price of $53.42 per share at close on Sept. 30 for a price-sales ratio of 0.92, which is less compelling than the industry median of 0.64 but still substantially below the S&P 500's price-sales ratio of 2.39.
Renewable Energy Group Inc has a GuruFocus profitability rating of 7 out of 10, driven by an operating margin of 22.1% (versus the industry median of 1.2%) and a net margin of 21.5% (versus the industry median of -5.2%). The ROE ratio is 58.9% (versus the industry median of -6.6%), the ROA ratio is 38.9% (versus the industry median of -4.3%) and the ROC ratio (as defined by Joel Greenblatt) is 58.3% (versus the industry median of -3.9%).
Furthermore, the three-year Ebitda growth rate is 55.8% (versus the industry median of 7.9%) and the three-year earnings per share (EPS) without non-recurring items (NRI) growth rate is 81% (versus the industry median of 11%).
The company has received a high GuruFocus financial strength rating of 8 out of 10, driven by an equity-to-asset ratio of 0.78 (versus the industry median of 0.45), and a debt-to-Ebitda ratio of 0.17 (versus the industry median of 3.51).
The interest coverage ratio is 73.56 (versus the industry median of 4.1), the Piotroski F-Score is 7 out of 9 and the Altman Z-Score is 8.2 (greater than 2.99), indicating a strong balance sheet.
The return on invested capital (ROIC) ratio is 54.1%, which is 6.13 times the weighted average cost of capital (WACC) of 8.83%, indicating overall profitability.
Following a nearly 272% increase over the past year, the stock now trades at a market capitalization of $2.1 billion, while the 52-week range is $13.67 to $54.74.
Wall Street sell-side analysts recommend a buy rating for this stock and have produced an average target price of $57.43 per share.
Flexible Solutions International Inc
The third stock investors may want to consider is Flexible Solutions International Inc (FSI, Financial), a Canadian global marketer of specialty chemicals that are used to slow the evaporation of water.
The stock traded at a price of $2.04 per share at close on Sept. 30 for a price-sales ratio of 0.88, which is more compelling than the industry median of 1.17 and the S&P 500 price-sales ratio of 2.39.
Flexible Solutions International Inc has a positive GuruFocus profitability rating of 7 out of 10, driven by a net margin of 11.7% (versus the industry median of 4.7%) and a ROE ratio of 17.9% (versus the industry median of 6.5%). The ROA ratio is 10% (versus the industry median of 3.5%), the ROC ratio (as defined by Joel Greenblatt) is 27.6% (versus the industry median of 10.4%) and the three-year revenue growth rate is 17.6% (versus the industry median of 5.2%).
The company has a GuruFocus financial strength rating of 7 out of 10, driven by a debt-to-Ebitda ratio of 1.31 (versus the industry median of 2.5), a Piotroski F-Score of 6 out of 9 and an Altman Z-Score of 3.3 (greater than 2.99), indicating high financial stability.
Furthermore, the return on invested capital (ROIC) of 13% exceeds the weighted average cost of capital (WACC) of 10.2%, indicating efficient employment of capital.
Over the past year, the share price has declined 13.5%, pushing the stock down to a market cap of $24.97 million, while the 52-week range is $0.86 to $3.15.
One sell-side analyst on Wall Street recommends a buy rating for this stock and has established a target price of $3.50 per share.
Disclosure: I have no positions in any securities mentioned in this article.
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