If you want to increase your rate of success in finding value opportunities, one method is to pick stocks whose trailing 12-month price-to-free-cash-flow ratios are very low compared to that of the S&P 500 Index, which stands at around 15.11 currently.
Therefore, investors may want to consider the following stocks, as they meet the above criteria and are recommended by sell-side analysts on Wall Street.
The Toronto-Dominion Bank
The first stock investors may want to consider is The Toronto-Dominion Bank (TD, Financial), a Toronto, Canada-based provider of various banking products and services to households and businesses in North America.
The Toronto-Dominion Bank's price-to-free-cash-flow ratio is 0.69 as of May 17, ranking higher than 90% of 1,085 companies that operate in the banks industry.
The Toronto-Dominion Bank's free cash flow per share for the trailing 12 months ended in January stood at $106.57, growing 1,867.60% over the past year.
Thanks to an 82% increase that occurred over the past year, the stock traded at $73.26 per share at close on Monday for a market capitalization of $132.64 billion and a 52-week range of $39.06 to $73.37.
Currently, The Toronto-Dominion Bank is paying quarterly dividends to its shareholders, with the most recent payment of 79 Canadian cents (66 U.S. cents) per common share issued on April 30. The payment produces a trailing 12-month dividend yield of 3.34% and a forward dividend yield of 3.51%, as of May 17.
GuruFocus assigned a score of 4 out of 10 to the company's financial strength and 6 out of 10 to its profitability.
On Wall Street, the stock has a median recommendation rating of hold with an average target price of $64 per share.
Group 1 Automotive Inc
The second stock investors may want to consider is Group 1 Automotive Inc (GPI, Financial), a Houston, Texas-based operator of dealerships in the U.S., UK and Brazil for the sale of new and used cars, light trucks and vehicle parts.
Group 1 Automotive Inc's price-to-free-cash-flow ratio is 3.41 as of May 17, ranking higher than 89% of 761 companies that operate in the vehicles and parts industry.
The company's free cash flow per share for the trailing 12 months ended in March 2021 stood at $50.09. The free cash flow grew by 751.90% over the past year.
As a result of a 212% increase that happened over the past year, the stock was trading at $170.59 per share at close on Monday for a market capitalization of $3.10 billion and a 52-week range of $47 to $175.04.
Currently, Group 1 Automotive Inc pays quarterly dividends to its shareholders, with the most recent one, 31 cents per common share (up 3.33% from the previous payment), made on March 15, while the next one, 33 cents per common share, is set to issue on June 15. The stock offers a trailing 12-month dividend yield of 0.36% and a forward dividend yield of 0.77% as of May 17.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength and 8 out of 10 to its profitability.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $214.20 per share.
Tri Pointe Homes Inc
The third stock investors may want to consider is Tri Pointe Homes Inc (TPH, Financial), an Incline Village, Nevada-based single-family attached and detached homes builder in the United States.
Tri Pointe Homes Inc's price-to-free-cash-flow ratio is 4.55 as of May 17, ranking higher than 76% of 79 companies that operate in the homebuilding and construction industry.
The company's free cash flow per share for the trailing 12 months ended in March 2021 was $5.38, increasing by 143.20% over the past year.
Thanks to a 95.21% increase that took place over the past year, the stock traded at $24.46 per share at close on Monday for a market capitalization of $2.90 billion and a 52-week range of $12.05 to $26.35.
Currently, Tri Pointe Homes Inc does not pay dividends.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength and 7 out of 10 to its profitability.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $26.75 per share.
Disclosure: I have no positions in any securities mentioned.
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
