When searching for opportunities among growing companies, investors may want to consider the following three stocks, as their share prices are trading lower than their Peter Lynch fair values.
The Peter Lynch fair value, which is based on the idea that the fair price-earnings ratio for a growing company is equal to its growth rate, stems from the combination of the following three components:
- The stock's PEG ratio.
- The stock's five-year Ebitda growth rate.
- The stock's earnings per share without non-recurring items for the trailing 12 months through the most recent quarter.
Dell Technologies
The first stock that qualifies is Dell Technologies Inc. (DELL, Financial), a Round Rock, Texas-based developer and manufacturer of IT hardware, software and high technology solutions, selling its products and services to global customers.
On Tuesday, Dell Technologies' stock closed at $101.48, below its Peter Lynch fair value per share of $105.25, for a price-to-Peter Lynch ratio of about 0.96. This ranks higher than 69% of the 530 companies that operate in the hardware industry.
The stock has a market capitalization of $77.40 billion after a 162% rise that occurred over the past year. The 52-week range is $37.2 to $103.8.
The stock has a GuruFocus financial strength rating of 4 out of 10 and a profitability rating of 3 out of 10.
As of April, the stock has a median recommendation rating of overweight on Wall Street. The average target price is $104.73 per share.
Trinet Group
The second stock to consider is Trinet Group Inc. (TNET, Financial), a Dublin, California-based provider of staffing and employment services to small and midsize companies in North America.
On Tuesday, Trinet Group's share price closed at $82.6, well below the Peter Lynch fair value per share of $99.50, for a price-to-Peter Lynch ratio of about 0.83. This ranks higher than 76% of the 228 companies that operate in the business services industry.
The stock has a market capitalization of $5.44 billion after an 80% jump that occurred over the past year. The 52-week range is $42.28 to $87.60.
The stock has a GuruFocus financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10.
As of April, the stock has a median recommendation rating of overweight on Wall Street and an average target price of $88.50 per share.
Insperity
The third stock that qualifies is Insperity Inc. (NSP, Financial), a Kingwood, Texas-based provider of human resources and business solutions for small and medium-sized businesses.
On Tuesday, Insperity's stock closed at $85.74, below its Peter Lynch fair value per share of $88.25, for a price-to-Peter Lynch ratio of about 0.98. This ranks higher than 71% of the 228 companies that operate in the business services industry.
The stock has a market capitalization of $3.25 billion after a nearly 111.72% rise that happened over the past year. The 52-week range is $39.78 to $95.78.
The stock has a GuruFocus financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10.
As of April, the stock has a median recommendation rating of overweight on Wall Street. The average target price is $88.50 per share.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- A Trio of Stocks That Could Represent Bargain Opportunities
- A Trio of Highly Profitable Businesses With Solid Conditions
- 3 Low Median Price-Sales Stocks to Consider
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