If you want to increase your likelihood of coming across bargains amid U.S.-listed equities, then one way is to look for 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 unsteady 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 amid the community of sell-side analysts on Wall Street.
Piper Sandler Cos
The first stock that makes the cut is Piper Sandler Cos (PIPR, Financial), a Minneapolis, Minnesota-based investment bank and institutional securities firm serving corporations, institutional investors, private equity groups, public and non-profit entities in the U.S. and internationally.
The stock traded at around $103.67 per share at close on Friday, which represents a strong discount of 54% to the projected free cash flow of $226.05 per share.
The share price has risen by 23.64% over the past year for a market capitalization of $1.85 billion and a 52-week range of $31.95 to $106.67.
GuruFocus has assigned a score of 4 out of 10 for both the company's financial strength and its profitability.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $111.67 per share.
Raymond James Financial Inc
The second stock that qualifies is Raymond James Financial Inc (RJF, Financial), the Saint Petersburg, Florida-based financial services company, engaging in capital markets in North America and Europe.
The stock traded at around $102.94 per share at close on Friday, which represents a 6% discount to the projected free cash flow of $109.41 per share.
The price has risen 7% over the past year, which determined a market capitalization of $14.17 billion and a 52-week range of $54.21 to $105.18.
GuruFocus has assigned a score of 4 out of 10 for the company's financial strength and of 6 out of 10 for its profitability.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $114.06 per share.
Kelly Services Inc
The third stock that holds the criteria is Kelly Services Inc (KELYA, Financial), a Troy, Michigan-based provider of workforce solutions to several businesses worldwide.
The stock traded at around $21.26 per share at close on Friday, representing a big discount of 48.5% to the projected free cash flow of $41.26.
The share price has fallen by 3.3% over the past year, determining a market capitalization of $833.87 million and a 52-week range of $10.13 to $23.00.
GuruFocus has assigned a score of 7 out of 10 for the company's financial strength and of 6 out of 10 for its profitability.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $25 per share.
Disclosure: I have no positions in any securities mentioned in this article.
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