When screening the market in search of value opportunities, one method is to look for stocks whose trailing 12-month price-to-free-cash-flow ratios are low compared to that of the S&P 500 index, which stands at around 17.33 as of the writing of this article. In my opinion, these stocks are more likely to be selling at a compelling price.
Thus, investors may want to consider the following three stocks, as they meet the above criteria and are recommended by Wall Street.
Conagra Brands Inc
The first stock to consider is Conagra Brands Inc (CAG, Financial), a Chicago, Illinois-based supplier of shelf stable packaged food products to retailers, restaurants and food service businesses.
Conagra Brands' price-to-free-cash-flow ratio is 11.6 as of Dec. 8, ranking higher than 62% of companies that operate in the consumer packaged goods industry.
Conagra Brands' free cash flow per share for the trailing twelve months through the most recent quarter was $3.08. It grew by 0.8% per year over the past 10 years, fell by 2.4% per year over the past five years and grew by 69.6% over the past year.
Following a 22.2% increase which happened over the past year, the stock price traded at $35.70 per share at close on Tuesday for a market capitalization of $17.44 billion and a 52-week range of $22.83 to $39.34.
Currently, Conagra Brands is paying dividends to its shareholders, with the last distribution, 27.5 cents per common share, made on Dec. 2. The payment produces a trailing twelve-month dividend yield of 2.56% as of Dec. 8.
GuruFocus assigned a score of 4 out of 10 to the financial strength rating and of 6 out of 10 to the profitability rating of the company.
Wall Street recommends an overweight recommendation rating with an average target price of $38.59 per share for the stock.
Quest Diagnostics Inc
The second stock investors may want to consider is Quest Diagnostics Inc (DGX, Financial), a Secaucus, New Jersey-based diagnostics and research services provider.
Quest Diagnostics' price-to-free-cash-flow ratio is 12.23 as of Dec. 8, ranking higher than 86% of companies that operate in the medical diagnostics and research industry.
Quest Diagnostics' free cash flow per share for the trailing twelve months through the most recent quarter was $10.14. It increased by 3.2% per year over the past 10 years, by 9.4% per year over the past five years and by 71.1% over the past year.
As a result of an 18.25% increase over the past year, the stock price traded at $124.09 per share at close on Tuesday for a market capitalization of $16.72 billion and a 52-week range of $73.02 to $131.81.
Currently, Quest Diagnostics is paying a quarterly cash dividend of 56 cents per common share, with the next payment to be made on Feb. 3, 2021, giving a forward dividend yield of 1.8% as of Dec. 8.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength rating and of 8 out of 10 to its profitability rating.
Wall Street recommends a median rating of overweight with an average target price of $141.81 per share for the stock.
Leidos Holdings Inc
The third stock to consider is Leidos Holdings Inc (LDOS, Financial), a Reston, Virginia-based global information technology services provider.
Leidos Holdings' price-to-free-cash-flow ratio is 10.83 as of Dec. 8, ranking higher than 75% of companies that operate in the software industry.
Leidos Holdings' free cash flow per share for the trailing twelve months through the most recent quarter was $9.60. It increased by 18.1% per year over the past five years and by 67.3% over the past year.
After a 15.96% increase which occurred over the past year, the stock price was trading at around $103.95 per share at close on Tuesday for a market capitalization of $14.79 billion and a 52-week range of $68 to $125.84.
Currently, Leidos Holdings is paying dividends to its shareholders. The next payment will consist in a quarterly cash dividend per common share of 34 cents to be made on Dec. 31, producing a forward dividend yield of 1.31% as of Dec. 8.
GuruFocus assigned a score of 5 out of 10 to the financial strength rating and of 6 out of 10 to the profitability rating of the company.
Wall Street recommends a median rating of buy with an average target price of $115.42 per share for the stock.
Disclosure: I have no position in any security mentioned.
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