If you are looking for bargain opportunities, you may want to consider the following securities as they appear to be undervalued by the market. In fact, their trailing 12-month and forward price-earnings to growth (PEG) ratios trade below 1.5, which, as of Jan. 25, is the S&P 500 historical mean value.
PEG is calculated as the price-earnings ratio without nonrecurring items divided by the growth ratio. The growth rate we consider here is the five-year Ebitda growth rate.
The forward PEG ratio is calculated as the price-earings ratio without NRI divided by the next five-year earnings per share growth rate.
Furthermore, these stocks have received positive recommendation ratings from sell-side analysts on Wall Street.
The first company that qualifies is Facebook Inc. (FB, Financial), the Menlo Park, California-based social media giant.
As of Jan. 29, Facebook has a share price of $258.33, a price-earings ratio of 25.58, a past five-year Ebitda growth rate of 33.80% and a next five-year earnings growth rate of 21.50%. Thus, the trailing 12-month PEG ratio is 0.76 and the forward PEG ratio is 1.19.
After a 28% increase over the past year, the market capitalization stands at $735.64 billion, and the 52-week range is $137.10 to $304.67.
GuruFocus assigned a score of 7 out of 10 for the company's financial strength and of 10 out of 10 for its profitability.
As of January, Wall Street sell-side analysts recommend 17 strong buys, 24 buys, one hold, one underperform and one sell rating for the stock with an average target price of $334.87.
Lam Research
The second company that qualifies is Lam Research Corp. (LRCX, Financial), a Fremont, California-based designer and manufacturer of semiconductor processing equipment, which is used to produce integrated circuits.
As of Jan. 29, Lam Research has a share price of $483.95, a price-earings ratio of 24.01, a past five-year Ebitda growth rate of 28.90% and a next five-year earnings per share growth rate of 22.97%. Therefore, the trailing 12-month PEG ratio is 0.83 and the forward PEG ratio is 1.05.
Following a 62.3% increase over the past year, the market capitalization is $69.30 billion and the 52-week range is $181.38 to $585.42.
GuruFocus assigned a score of 6 out of 10 for the company's financial strength and 9 out of 10 for its profitability.
As of January, Wall Street sell-side analysts recommend four strong buys, 12 buys and three hold ratings for an average target price of $568.52 per share.
Align Technology
The third company that qualifies is Align Technology Inc. (ALGN, Financial), a San Jose, California-based designer and marketer of medical devices for the dental industry.
As of Jan. 29, Align Technology has a share price of $525.38, a price-earings ratio of 23.90, a past five-year Ebitda growth rate of 27.20% and a next five-year earnings per share growth rate of 19.01%. Thus, the trailing 12-month PEG ratio is 0.83 and the forward PEG ratio is 1.26.
As a result of a 104.35% increase over the past year, the market capitalization is $41.43 billion and the 52-week range is $127.88 to $579.50.
GuruFocus assigned a score of 7 out of 10 to the company's financial strength rating and 8 out of 10 to its profitability.
As of January, Wall Street sell-side analysts recommend seven strong buys and four buy ratings for an average target price of $531.29 per share for this stock.
Disclosure: I have no positions in any securities mentioned.
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