3 Stocks Trading Below the Peter Lynch Earnings Line

These businesses could be value opportunities

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Alberto Abaterusso
Mar 17, 2021
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Value investors may be interested in the following three stocks since their share prices are trading below their respective Peter Lynch earnings lines, indicating they could be undervalued. Sell-side analysts on Wall Street have also issued positive ratings for these companies.

The Cooper Companies

The first stock to consider is The Cooper Companies Inc. (

COO, Financial), a San Ramon, California-based global medical device manufacturer.

The chart exhibits that the share price ($382.19 at close on March 16) is currently trading below the Peter Lynch earnings line ($679.5 as of Jan. 28, 2021).

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The stock has lost approximately 51% over the past year through Tuesday for a market capitalization of $18.60 billion and a 52-week range of $236.68 to $401.92.

Wall Street sell-side analysts estimate the share price will increase over the next 52 weeks as the target price of $406.45 represents a 7.2% upside from Tuesday's closing price. The stock has a median recommendation rating between buy and hold. Earnings per share are also expected to increase 35.3% to $13.04 this year, 10.70% to $14.44 in 2022 and 10% per year (on average) over the next five years.

GuruFocus has assigned a score of 6 out of 10 to the company's financial strength and 8 out of 10 to its profitability.

Vanguard Group Inc. leads the group of top fund holders of the company, holding 11.31% of shares outstanding. It is followed by T Rowe Price Associates Inc. with 8.04% and BlackRock Inc. with 7.85%.

Hologic

The second stock to consider is Hologic Inc. (

HOLX, Financial), a Marlborough, Massachusetts-based developer and supplier of medical systems and medical products for women's health in the U.S. and internationally.

The chart illustrates that the share price ($71.95 per share as of March 16) is currently standing below the Peter Lynch earnings line ($79.05 as of Dec. 30, 2020).

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The stock has climbed more than 140% over the past year through Tuesday, determining a market capitalization of $18.62 billion and a 52-week range of $26.49 to $85.

Wall Street sell-side analysts predict the share price will rebound strongly within 52 weeks, reaching a target price of $88.85 per share, which mirrors more than 23% upside from Tuesday's closing price. The stock has a median recommendation rating of buy. Analysts forecast that the trailing 12-month earnings per share will rise 10.5% every year over the next five years.

GuruFocus has assigned a score of 5 out of 10 to the company's financial strength and 7 out of 10 to its profitability.

T. Rowe Price is the largest fund holder of the company, owning 15.24% of shares outstanding. It is followed by Vanguard Group with 10.69% of shares outstanding and BlackRock with 8.09%.

Quest Diagnostics

The third stock to consider is Quest Diagnostics Inc, (

DGX, Financial), a Secaucus, New Jersey-based diagnostics and research services provider.

The chart shows the share price ($122.68 per share at close on March 16) is currently trading below the Peter Lynch earnings line ($156.6 as of Dec. 30, 2020).

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The stock has gained more than 60% over the past year through Tuesday, which determined a market capitalization of $16.62 billion and a 52-week range of $73.02 to $134.71.

Wall Street predicts this stock will bounce back strongly within 12 months as sell-side analysts have established an average target price of $140.07, which reflects 12.4% upside from Tuesday's closing price. The stock has a recommendation between a buy and a hold rating. The trailing 12-month earnings per share are projected to go up 9.22% annually over the next five years.

GuruFocus has assigned a score of 6 out of 10 to the financial strength and of 9 out of 10 to the profitability of the company.

Vanguard Group is the top fund holder with 10.78% of shares outstanding. It is followed by BlackRock with 8.51% and State Street Corp. with 4.78%.

Disclosure: I have no positions in any securities mentioned.

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