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Alberto Abaterusso
Alberto Abaterusso
Articles (2382) 

A Trio of Stocks Trading Below the Peter Lynch Fair Value

They could represent growth opportunities

October 22, 2020 | About:

Investors seeking opportunities amid growing companies may be interested in the three stocks listed below, as their share prices are standing lower than the Peter Lynch Fair Value.

The Peter Lynch Fair Value, which is based on the idea that the fair price-earnings (PE) value for a growing company matches its growth rate (that is, the price-earnings-to-growth (PEG) ratio equal to 1), is the result of the combination of the following three factors:

  • The stock's PEG ratio.
  • The stock's five-Year Ebitda growth rate.
  • The stock's earnings per share (EPS) without non-recurring items (NRI) for the trailing twelve months (TTM) through the most recent quarter.

Applied Materials Inc

The first stock that makes the cut is Applied Materials Inc (NASDAQ:AMAT), a Santa Clara, California-based supplier of manufacturing equipment, services and software to semiconductor producers.

On Wednesday, Applied Materials Inc's share price closed at $62.11, significantly below its Peter Lynch Fair Value per share of $86 for a price-to-Peter-Lynch-Fair-Value Ratio of about 0.72. This ranks higher than 82% of the 218 companies that are operating in the semiconductors industry.

The stock has a market capitalization of $56.24 billion after a 23% increase which happened over the past year. The 52-week range is $36.64 to $69.90.

Also, its price-earnings ratio is 17.91 (versus the industry median of 27.74), the price-book ratio is 5.88 (versus the industry median of 2.17) and the price-sales ratio is 3.5 (versus the industry median of 2.18).

The stock has a GuruFocus financial strength rating of 7 out of 10 and a profitability rating of 9 out of 10.

As of October, the stock has five strong buy recommendation ratings, 15 buy recommendation ratings and only one hold recommendation rating for an average target price of $75.96 per share.

Lennar

The second stock that makes the cut is Lennar Corporation (NYSE:LEN), a Miami, Florida-based homebuilder.

On Wednesday, Lennar Corporation's share price closed at $80.09, substantially below its Peter Lynch Fair Value per share of $89.48 for a price-to-Peter-Lynch-Fair-Value Ratio of about 0.90. This is beating 13 out of 50 companies operating in the homebuilding and construction industry.

The stock has a market capitalization of $24.43 billion after a nearly 30% increase which occurred over the past year. The 52-week range is $25.42 to $86.80.

Also, its price-earnings ratio is 11.15 (versus the industry median of 11.46), the price-book ratio is 1.46 (versus the industry median of 1.07) and the price-sales ratio is 1.1 (versus the industry median of 0.75).

The stock has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10.

As of October, the stock has seven strong buy recommendation ratings, six buy recommendation ratings and nine hold recommendation ratings for an average target price of $87.94 per share.

Ameriprise Financial Inc

The third stock that makes the cut is Ameriprise Financial Inc (NYSE:AMP), a Minneapolis, Minnesota-based asset management company that provides various financial products and services to U.S. and international individual and institutional clients.

On Wednesday, Ameriprise Financial Inc share price closed at $166.75, significantly below its Peter Lynch Fair Value per share of $273.51 for a price-to-Peter-Lynch-Fair-Value Ratio of about 0.61. This ranks higher than 67% of the 105 companies that are operating in the asset management industry.

The stock has a market capitalization of $20.13 billion after a 16.2% increase which occurred over the past year. The 52-week range is $80.01 to $180.85.

Also, its price-earnings ratio is 8.74 (versus the industry median of 18.19), the price-book ratio is 3.1 (versus the industry median of 0.96) and the price-sales ratio is 1.78 (versus the industry median of 8.74).

The stock has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10.

As of October, the stock has three strong buy recommendation ratings, three buy recommendation ratings and five hold recommendation ratings for an average target price of $181 per share.

Disclosure: I have no position in any security mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master\\\'s Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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