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Alberto Abaterusso
Alberto Abaterusso
Articles (2538) 

3 Stocks Trading Below the Peter Lynch Earnings Line

These businesses could be value opportunities

January 22, 2021 | About:

Value investors may want to consider the following stocks, as their share prices are standing below the Peter Lynch earnings line, indicating they could be undervalued. Sell-side analysts on Wall Street have also issued positive ratings for these stocks.

Axos Financial Inc

The first stock to consider is Axos Financial Inc (NYSE:AX), a Las Vegas, Nevada-based regional bank providing banking products and other financial services to U.S. consumers and businesses.

The below chart shows that the share price ($41.02 at close on Jan. 21) is currently trading below the Peter Lynch earnings line ($48.15 as of Sept. 28, 2020).

The stock price has gained 39.10% over the past year through Thursday, determining a market capitalization of $2.42 billion and a 52-week range of $13.69 to $43.48.

Wall Street sell-side analysts predict that the share price will trade higher over the next 12 months, rising 3.4% up to $42.43, while the trailing 12-month EPS is expected to hit $3.16 this year (up 6% year over year). The stock has a median recommendation rating of buy.

GuruFocus has assigned a score of 3 out of 10 to the financial strength and 6 out of 10 to the profitability of the company.

BlackRock Inc. and Vanguard Group Inc dominate the group of top fund holders of the company, holding 13.59% and 8.7%, respectively, of shares outstanding.

Barrett Business Services Inc

The second stock to consider is Barrett Business Services Inc (NASDAQ:BBSI), a Vancouver-based provider of business management solutions to small and mid-sized U.S. companies.

The below chart shows that the stock price ($67.45 per share as of Jan. 21 ) is currently standing below the Peter Lynch earnings line ($74.55 as of Sept. 28, 2020).

The stock price has decreased by 23.34% over the past year through Thursday, determining a market capitalization of $515.75 million and a 52-week range of $27.25 to $88.15.

Wall Street sell-side analysts forecast that the share price will rebound strongly within a year, hitting $80.25, which represents a nearly 20% upside from Thursday's closing price. Analysts predict that the trailing 12-month EPS will improve 12.4% year over year up to $4.63 in 2021. The stock has a median recommendation rating between buy and strong buy.

GuruFocus has assigned a score of 7 out of 10 to the financial strength and 6 out of 10 to the profitability of the company.

BlackRock Inc. is the largest top fund holder of the company, owning 6.98% of shares outstanding. It is followed by Capital World Investors with 5.40% of shares outstanding and JP Morgan Chase & Co with 5.20% of shares outstanding.

PPL Corp

The third stock to consider is PPL Corp (NYSE:PPL), an Allentown, Pennsylvania-based utility company that generates electricity in Kentucky and supplies it to its customers in several U.S. states as well as overseas. The company also distributes natural gas from its plant in Kentucky.

The below chart illustrates that the stock price ($27.76 per share at close on Jan. 21) is currently trading below the Peter Lynch earnings line ($30.30 as of Sept. 28, 2020).

The stock price has fallen 24.4% over the past year through Thursday, which determined a market capitalization of $21.34 billion and a 52-week range of $18.12 to $36.83.

The share price is expected to perform well over the next 12 months, as Wall Street has generated an average price target of $30.58 per share, which reflects a 10.2% increase from Thursday's closing price. The trailing 12-month EPS is projected to hit $2.47 in 2021, up 2.5% from 2020. The stock has a median recommendation rating of hold.

GuruFocus has assigned a score of 3 out of 10 to the financial strength and of 6 out of 10 to the profitability of the company.

Vanguard Group Inc leads the group of the company's top fund holders, owning 10.18% of shares outstanding. It is followed by BlackRock Inc. with 8.90% and State Street Corp with 5.41%.

Disclosure: I have no position in any security mentioned.

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About the author:

Alberto Abaterusso
I am a contributor at GuruFocus. I primarily write about how to pick potential value stocks. Gold, silver and precious metals mining industries is also my cup of tea. My articles have also been widely linked by popular sites, including MarketWatch, Financial Times, 24hGold, Investopedia, Financial.org, CNBS, MSN Money, Zachs, Reuters and others. I hold a Master\\\'s Degree in Business Administration from Università degli Studi di Bari (Italy), Aldo Moro. I am based in The Netherlands.

You can follow me on Twitter at https://twitter.com/AAbaterusso

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