When looking for bargain opportunities, investors may want to consider the three securities listed below, as they look underestimated by the market. Their trailing 12-month and forward price-earnings to growth ratios are at or below 1.5 as of Sept. 1, which is the S&P 500's historical average PEG ratio.
The PEG ratio is calculated as the price-earnings ratio without non-recurring items divided by the five-year Ebitda growth rate. For financial stocks, the five-year book value growth rate is used instead.
The forward PEG ratio is calculated as the price-earnings ratio without NRI divided by the expected future earnings per share growth rate, which is a projection for the next five years based on analysts' estimates.
Wall Street sell-side analysts have also issued positive recommendation ratings for these stocks, which means they expect share prices to trade higher over the coming months.
Sandy Spring Bancorp Inc
The first company that makes the cut is Sandy Spring Bancorp Inc (SASR, Financial), an Olney, Maryland-based regional bank providing various banking products and services to individuals and businesses located in Maryland, Virginia, Washington and the District of Columbia via a network of approximately 65 branches.
As of Sept. 1, Sandy Spring Bancorp Inc has a share price of $43.40, a price-earnings ratio of 8.86, a historical five-year book value growth rate of 9.60% and an estimated future five-year earnings growth rate of 9.30%. Thus, the trailing 12-month PEG ratio is 0.92 and the forward PEG ratio is 0.95.
After the share price has risen by 79% over the past year, the market capitalization now stands at $2.05 billion and the 52-week range is $21.11 to $48.22.
GuruFocus assigned a score of 4 out of 10 for the company's financial strength and 5 out of 10 for its profitability.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $50 per share.
Primoris Services Corp
The second company that qualifies is Primoris Services Corp (PRIM, Financial), a Dallas, Texas-based engineering and construction services company serving several businesses in North America, including operators in the oil and gas industry and also utility companies.
As of Sept. 1, Primoris Services Corp has a share price of $25.87, a price-earnings ratio of 11.08, a historical five-year Ebitda growth rate of 16.50% and an estimated future five-year earnings growth rate of 10%. Thus, the trailing 12-month PEG ratio is 0.67 and the forward PEG ratio is 1.11.
After a 34% rise over the past year, the market capitalization is $1.40 billion and the 52-week range is $17.07 to $41.76.
GuruFocus assigned a score of 5 out of 10 for the company's financial strength and 8 out of 10 for its profitability.
On Wall Street, the stock has a median recommendation rating of buy with an average target price of $37.43 per share.
Heritage Financial Corp
The third company that qualifies is Heritage Financial Corp (HFWA, Financial), an Olympia, Washington-based regional bank that provides various financial services to individuals as well as small and medium-sized businesses located in Washington and Oregon through a network of 61 banking offices.
As of Sept. 1, Heritage Financial Corp has a share price of $25.34, a price-earnings ratio of 9.29, a historical five-year book value growth rate of 9.00% and an estimated future five-year earnings per share growth rate of 7%. Thus, the trailing 12-month PEG ratio is 1.03 and the forward PEG ratio is 1.33.
Following a 23% rise over the past year, the market capitalization is $908.98 million and the 52-week range is $17.39 to $30.86.
GuruFocus assigned a score of 5 out of 10 to both the company's financial strength rating and its profitability rating.
On Wall Street, the stock has a median recommendation rating of hold with an average target price of $27.13 per share.
Disclosure: I have no positions in any security mentioned.
