If you want to enhance your likelihood to uncover bargains, one way to do so is to screen the market for equities that are trading at a discount to their intrinsic value estimate as calculated from the projected free cash flow (FCF) valuation model.
Unlike the discounted cash flow or discounted earnings valuation models, the projected FCF model can be applied to appraise the value of companies whose record of revenue and earnings is erratic and may also incorporate losses in some quarters. The projected FCF uses normalized free cash flow and book value.
The following three stocks seem undervalued according to the projected FCF model. They also hold positive recommendation ratings amid the community of sell-side analysts on Wall Street.
Gray Television Inc
The first company that makes the cut is Gray Television Inc (GTN, Financial), an Atlanta, Georgia-based television broadcasting company.
The stock traded at around $19.63 per share at close on Friday, which represents a discount of 67.4% to the projected free cash flow of $60.14 per share.
The share price has risen by 88.21% over the past year for a market capitalization of $1.86 billion and a 52-week range of $9.44 to $21.22.
GuruFocus has assigned a score of 4 out of 10 for the company's financial strength and of 9 out of 10 for its profitability.
As of April, the stock has a median recommendation rating falling between strong buy and buy and an average target price of $25 per share on Wall Street.
Global Ship Lease Inc
The second stock that makes the cut is Global Ship Lease Inc (GSL, Financial), a London, United Kingdom-based owner and charter of more than 40 mid-sized and smaller containerships to container shipping companies, applying fixed-rate charters.
The stock traded at around $13.29 per share at close on Friday, which represents a 64.7% discount to the projected free cash flow of $37.63 per share.
The price has grown by 246.1% over the past year, which determined a market capitalization of $485.53 million and a 52-week range of $3.02 to $17.85.
GuruFocus has assigned a score of 3 out of 10 for the company's financial strength and 6 out of 10 for its profitability.
On Wall Street, the stock has a median recommendation rating falling between strong buy and buy with an average target price of $18 per share.
Silvercrest Asset Management Group Inc
The third stock that possesses the criteria is Silvercrest Asset Management Group Inc (SAMG, Financial), a New York-based asset management firm serving ultra-high net worth individuals and families, their trusts, as well as institutional investors and investment funds.
The stock traded at around $14.47 per share at close on Friday, representing a 48.4% discount to the projected free cash flow of $28.06.
The share price has risen by nearly 58% over the past year, determining a market capitalization of $208.80 million and a 52-week range of $8.43 to $15.98.
GuruFocus has assigned a score of 6 out of 10 for the company's financial strength and of 8 out of 10 for its profitability.
On Wall Street, as of April, the stock has one recommendation rating of buy with a price target of $19.25 per share.
Disclosure: I have no positions in any securities mentioned in this article.
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