In my opinion, choosing U.S.-listed securities that have the following characteristics represents a solid starting point when in search of potential value opportunities:
- The share prices are trading close to or below their historical median valuations
- The return on invested capital (ROIC) surpasses the weighted average cost of capital (WACC), which suggests the company is adding value for shareholders
- The stock holds optimistic recommendation ratings amid the community of sell-side analysts on Wall Street
Thus, investors may be interested in the following three stocks, as they meet the above criteria.
Weibo Corp
The first company that meets the criteria is Weibo Corp (WB, Financial), a Chinese communication services company operating a social media platform in the People's Republic of China.
The share price ($45.75 as of Dec. 21) is above the Peter Lynch earnings line but still substantially below the median historical valuation line, as the chart below shows.
The stock has a market capitalization of $10.36 billion and a 52-week price range of $28.93 to $52.33.
Weibo Corp has a ROIC of 22.37%, which is three times higher than the WACC of 7.25%.
Wall Street sell-side analysts predict that after a 26.3% decrease (to $2.05) this year, Weibo Corp's EPS will increase by 25.4% (to $2.57) in 2021 and by 1.45% per annum over the next five years.
As of December, the stock has five strong buy recommendation ratings, 11 buy recommendation ratings, two hold recommendation ratings and one underperform recommendation rating on Wall Street. The average target price is $42.38 per share.
Amdocs Ltd
The second stock that makes the cut is Amdocs Ltd (DOX, Financial), a Chesterfield, Missouri-based global provider of software and services to several companies operating in the communications, media and financial services industries.
The share price ($69.24 as of Dec. 21) is above the Peter Lynch Earnings line but still on par with the median historical valuation line.
The stock has a market capitalization of $9.08 billion and a 52-week range of $44.05 to $77.29.
Amdocs Ltd has a ROIC of 11.16%, which is twice the WACC of 5.42%.
Wall Street sell-side analysts estimate Amdocs Ltd's EPS will increase by 7% (up to $4.75) this year, by 7.4% (up to $5.10) in 2021 and by 6.5% on average every year over the next five years.
As of December, the stock has four strong buy recommendation ratings and five hold recommendation ratings on Wall Street for an average target price of $75.71 per share.
Lockheed Martin Corp
The third stock that qualifies is Lockheed Martin Corp (LMT, Financial), a Bethesda, Maryland-based aerospace, defense, security and advanced technologies company.
The share price of $349.35 (as of Dec. 21) is trading near the Peter Lynch earnings line and below the median historical valuation line, as the chart below illustrates.
The stock has a market capitalization of $97.74 billion and a 52-week price range of $266.11 to $442.53.
Lockheed Martin Corp has a ROIC of 16.68%, which is more than twice the WACC of 6.46%.
Wall Street sell-side analysts predict that Lockheed Martin Corp's EPS will grow by 11.6% this year, 6.6% in 2021 and 8.1% every year over the next five years.
As of December, the stock has seven strong buy recommendations, three buy recommendations and 12 hold recommendation ratings on Wall Street for an average target price of $435.74 per share.
Disclosure: I have no positions in any securities mentioned.
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