If you are in search of bargain opportunities, then you may want to consider the three securities listed, below as they seem underestimated by the market. Their trailing 12-month and forward price-earnings to growth (PEG) ratios trade below 1.5, which, as of March 25, approximately corresponds to the S&P 500's historical mean value.
The PEG ratio is calculated as the price-earnings ratio without non-recurring items (NRI) divided by the five-year Ebitda growth rate. The forward PEG ratio is calculated as the price-earnings ratio without NRI divided by the predicted future five-year earnings per share growth rate.
Wall Street sell-side analysts have also issued optimistic recommendation ratings for these stocks, increasing that analysts expect they will perform well.
Dollar General Corp
The first company that makes the cut is Dollar General Corp (DG, Financial), a Goodlettsville, Tennessee-based discount store chain owner and operator in the U.S.
As of March 25, Dollar General has a share price of $197.78, a price-earnings ratio of 18.64, a past five-year Ebitda growth rate of 13.90% and an estimated future five-year earnings growth rate of 13.57%. Thus, the trailing 12-month PEG ratio is 1.34 and the forward PEG ratio is 1.37.
Due to a 35.4% increase over the past year, the market capitalization stands at $47.32 billion and the 52-week range is $125 to $225.25.
GuruFocus assigned a score of 5 out of 10 for the company's financial strength and of 9 out of 10 for its profitability.
On Wall Street, as of March, the stock has a median recommendation rating of buy with an average target price of $227.96 per share.
Manulife Financial Corp
The second company that makes the cut is Manulife Financial Corp (MFC, Financial), a Canadian insurance and asset management company serving individuals and institutional clients in North America and internationally.
As of March 25, Manulife Financial Corp has a share price of $21.37, a price-earnings ratio of 9.24, a past five-year Ebitda growth rate of 17.40% and an estimated future five-year earnings per share growth rate of 8.82%. Therefore, the trailing 12-month PEG ratio is 0.53 and the forward PEG ratio is 1.05.
Following a nearly 90% increase over the past year, the market capitalization is $41.63 billion and the 52-week range is $8.62 to $22.25.
GuruFocus assigned a score of 5 out of 10 for the company's financial strength and 6 out of 10 for its profitability.
On Wall Street, as of March, the stock has a median recommendation rating of overweight with an average target price of $21.67 per share.
Lennar Corp
The third company that makes the cut is Lennar Corp (LEN, Financial), a Miami, Florida-based homebuilder.
As of March 25, Lennar Corp has a share price of $99.14, a price-earnings ratio of 10.13, a past five-year Ebitda growth rate of 14.10% and an estimated future five-year earnings per share growth rate of 10.70%. Thus, the trailing 12-month PEG ratio is 0.72 and the forward PEG ratio is 0.95.
As a result of a 146.3% increase over the past year, the market capitalization is $30.24 billion, and the 52-week range is $25.42 to $101.55.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength rating and 8 out of 10 to its profitability.
On Wall Street, as of March, the stock has a median recommendation rating of overweight with an average target price of $106.56 per share.
Disclosure: I have no positions in any securities mentioned.
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