One way to have a higher chance of finding value opportunities is to screen for stocks whose trailing 12-month price-to-free-cash-flow ratios are low compared to that of the S&P 500 index. The price-to-free-cash-flow ratio of the S&P 500 stands at 16.32 as of the writing of this article.
Thus, investors may want to consider the following three stocks, as they meet the above criteria.
Lowe's Companies Inc
The first stock value investors may want to consider is Lowe's Companies Inc (LOW, Financial), a Mooresville, North Carolina-based home improvement retailer in North America.
Lowe's Companies Inc's price-to-free-cash-flow ratio is 11.03 as of Nov. 11, which is better than 320 competitors out of a total of 666 companies operating in the retail - cyclical industry.
Lowe's Companies Inc's free cash flow per share for the trailing twelve months through the most recent quarter (which ended on July 30) was $14.32. It grew by an average of 13.3% per year over the past 10 years, by 2.1% per year over the past five years and by 300.5% over the past year.
After a 40% increase which occurred over the past year, the stock price traded at $158 per share at close on Wednesday for a market capitalization of $119.41 billion and a 52-week range of $60 to $180.67.
Currently, Lowe's Companies Inc pays a 60 cents quarterly cash dividend per common share, producing a 1.42% trailing 12-month dividend yield as of Wednesday. The last payment was issued on Nov. 4.
GuruFocus assigned a score of 5 out of 10 to the financial strength rating and of 8 out of 10 to the profitability rating of the company.
Wall Street recommends an overweight recommendation rating with an average target price of $184.86 per share for the stock.
Tractor Supply Co
The second stock value investors should consider is Tractor Supply Co (TSCO, Financial), a Brentwood, Tennessee-based retail farm and ranch store operator in the U.S.
Tractor Supply Co's price-to-free-cash-flow ratio is 13.38 as of Nov. 11, standing higher than 280 competitors out of a total of 666 companies operating in the retail - cyclical industry.
Tractor Supply Co's free cash flow per share for the trailing twelve months through the most recent quarter (which ended on Sept. 25) was $9.94. It grew by 20.6% per year over the past 10 years, by 23% per year over the past five years and by 131% over the past year.
As a result of a 37.3% increase that happened over the past year, the stock price closed at $133.04 per share on Wednesday for a market capitalization of $15.50 billion and a 52-week range of $63.89 to $157.07.
Currently, Tractor Supply Co is paying a quarterly cash dividend of 40 cents per common share, with the next payment scheduled to be made on Dec. 8, for a forward dividend yield of 1.21% as of Nov. 11.
GuruFocus assigned a score of 6 out of 10 to the company's financial strength rating and of 9 out of 10 to its profitability rating.
Wall Street recommends an overweight recommendation rating with an average target price of $155.42 per share for the stock.
F5 Networks Inc
The third stock value investors may want to consider is F5 Networks Inc (FFIV, Financial), a Seattle-based provider of multi-cloud application services and delivery networking.
F5 Networks Inc's price-to-free-cash-flow ratio is 16.28 as of Nov. 11, which is more compelling than 803 competitors out of a total of 1,275 companies operating in the software industry.
F5 Networks Inc's free cash flow per share for the trailing twelve months through the most recent quarter (which ended on Sept. 29) was $9.81. It grew by 11.2% per year over the past 10 years, by 3.2% per year over the past five years and declined 8.1% over the past year.
The free cash flow growth rate should be back to positive this year already, as analysts predict higher net profits (up 6.1% year over year) on an improved revenue (up 6% year over year) as a result of an expected increase in software subscriptions and renewals.
Following a 9.1% increase that occurred over the past year, the stock price closed at $159.66 per share on Wednesday for a market capitalization of $9.76 billion and a 52-week range of $79.78 to $162.50.
F5 Networks Inc does not pay dividends.
GuruFocus assigned a score of 6 out of 10 to the financial strength rating and of 8 out of 10 to the profitability rating of the company.
Wall Street recommends an overweight recommendation rating with an average target price of $165.63 per share for the stock.
Disclosure: I have no position in any security mentioned.
Read more here:
- A Trio of Potential Deals You Shouldn't Miss
- A Trio of Potential Bargain Stocks to Consider
- 3 Stocks Trading Below the GuruFocus Value Line
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