If you want to enhance your likelihood of coming across bargains amid U.S.-listed equities, one way is to choose stocks that are trading at a discount to their intrinsic value as calculated by the projected free cash flow (FCF) valuation model.
Unlike the discounted cash flow or discounted earnings valuation models, the projected FCF model can also be applied to gauge businesses who have an irregular record of revenue and earnings, even including losses in some quarters. The projected FCF uses normalized free cash flow and book value.
The following stocks seem to be undervalued according to the projected FCF model. They also hold optimistic recommendation ratings from sell-side analysts on Wall Street.
Dick's Sporting Goods Inc
The first stock that makes the cut is Dick's Sporting Goods Inc (DKS, Financial).
The Coraopolis, Pennsylvania-based sporting goods retailer traded at around $59.49 per share at close on Friday, which represents a discount of approximately 17.3% to the projected free cash flow of $71.94 per share.
The share price has increased by 29% over the past year for a market capitalization of $5.33 billion and a 52-week range of $13.46 to $63.29.
GuruFocus has assigned a score of 5 out of 10 for the company's financial strength and of 8 out of 10 for its profitability.
The stock has an overweight recommendation rating with an average target price of $68.32 on Wall Street.
DXP Enterprises Inc
The second stock that makes the cut is DXP Enterprises Inc (DXPE, Financial), a Houston, Texas-based distributor of maintenance, repair and operating products, equipment and related services to North American energy and industrial customers.
The stock traded at around $22.31 per share at close on Friday, which represents an approximately 46.4% discount to the projected free cash flow of $41.62 per share.
The share price has fallen 40.82% over the past year, which determined a market capitalization of $396.91 million and a 52-week range of $10.44 to $42.28.
GuruFocus has assigned a score of 5 out of 10 for both the company's financial strength and its profitability.
On Wall Street, the stock has one recommendation rating of buy with a target price of $25.
HCA Healthcare Inc
The third stock that qualifies is HCA Healthcare Inc (HCA, Financial), a Nashville, Tennessee-based provider of healthcare services in the U.S.
The stock traded at around $153.05 per share at close on Friday, representing an 8.8% discount to the projected free cash flow of $167.76.
The share price has risen 10.51% over the past year, which determined a market capitalization of $51.79 billion and a 52-week range of $58.38 to $155.84.
GuruFocus has assigned a score of 4 out of 10 for the company's financial strength and of 8 out of 10 for its profitability.
On Wall Street, the stock holds a median recommendation rating of overweight with an average target price of $154.81.
Disclosure: I have no positions in any securities mentioned in this article.
Read more here:
- A Trio of Stock Picks for the Value Investor
- 2 Falling Knives to Catch
- This Trio Is Growing Earnings Fast
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
