When looking for bargain opportunities, investors may want to consider the following three securities, as they appear to be underestimated by the market. Their trailing 12-month and forward price-earnings to growth ratios trade below 1.5, which, as of May 20, approximately matches the S&P 500's historical average value.
The PEG ratio is calculated as the price-earnings ratio without non-recurring items divided by the five-year Ebitda growth rate. The forward PEG ratio is calculated as the price-earnings ratio without NRI divided by the future earnings per share growth rate, which is a projection for the next five years.
Wall Street sell-side analysts have also issued optimistic recommendation ratings for these stocks, indicating expectations for a strong share price performance over the coming months.
P.A.M. Transportation Services
The first company that makes the cut is P.A.M. Transportation Services Inc. (PTSI, Financial), a Tontitown, Arkansas-based trucking and logistics company.
As of May 20, P.A.M. Transportation Services has a share price of $57.28, a price-earnings ratio of 10.73, a past five-year Ebitda growth rate of 11.20% and an estimated future five-year earnings growth rate of 20%. Thus, the trailing 12-month PEG ratio is 0.95 and the forward PEG ratio is 0.53.
Thanks to an 88.42% increase over the past year, the market capitalization stands at $328 million and the 52-week range is $27.3 to $66.285.
GuruFocus assigned a score of 4 out of 10 for the company's financial strength and 7 out of 10 for its profitability.
On Wall Street as of May, the stock has one recommendation rating of buy with an average target price of $67 per share.
Tronox Holdings
The second company that qualifies is Tronox Holdings PLC (TROX, Financial), a Stamford, Connecticut-based global producer of chemicals that are employed in the manufacture of coatings, paints, plastics and paper.
As of May 20, Tronox Holdings has a share price of $22.53, a price-earnings ratio of 3.5, a past five-year Ebitda growth rate of 54.60% and an estimated future five-year earnings growth rate of 48.90%. Thus, the trailing 12-month PEG ratio is 0.06 and the forward PEG ratio is 0.07.
Thanks to a 271% increase over the past year, the market capitalization is $3.54 billion and the 52-week range is $6.15 to $23.855.
GuruFocus assigned a score of 4 out of 10 for both the company's financial strength and its profitability.
On Wall Street as of May, the stock has a median recommendation rating of overweight with an average target price of $26.75 per share.
The Carlyle Group
The third company that meets the criteria is The Carlyle Group Inc. (CG, Financial), a Washington D.C.-based asset management firm.
As of May 20, Carlyle Group has a share price of $42.26, a price-earnings ratio of 8.29, a past five-year Ebitda growth rate of 32.20% and an estimated future five-year earnings per share growth rate of 15.74%. Thus, the trailing 12-month PEG ratio is 0.26 and the forward PEG ratio is 0.53.
Thanks to a 57.6% increase over the past year, the market capitalization is $14.98 billion and the 52-week range is $23.48 to $45.23.
GuruFocus assigned a score of 3 out of 10 to the company's financial strength rating and 7 out of 10 to its profitability.
On Wall Street as of May, the stock has a median recommendation rating of overweight with an average target price of $47.63 per share.
Disclosure: I have no positions in any securities mentioned.
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