Selecting U.S.-listed equities that have the characteristics listed below represents a solid starting point when in search of potential value opportunities, in my opinion:
- The shares are trading near or below their intrinsic value based on the Peter Lynch chart.
- The return on invested capital (ROIC) exceeds the weighted average cost of capital (WACC), which means that the company is creating value for shareholders.
- The stock has optimistic recommendation ratings on Wall Street.
Thus, investors could be interested in the following stocks, since they meet the above criteria.
Sibanye Stillwater Ltd
The first company that makes the cut is Sibanye Stillwater Ltd (SBSW, Financial), a South African precious metals producer with mining activities located in North America and South Africa.
The share price ($13.23 as of Sept. 17) is well below the Peter Lynch earnings line ($64.32) and the median historical valuation line ($52.46), as the following chart shows.
The stock has a market capitalization of $9.28 billion and a 52-week price range of $10.26 to $20.68.
Sibanye Stillwater has a ROIC of 51.20%, which is more than 2.5 times the WACC of 18.79%.
On Wall Street, the stock has a median recommendation rating of buy with an average target price of $24.44 per share.
Catalyst Pharmaceuticals Inc
The second stock that meets the criteria is Catalyst Pharmaceuticals Inc (CPRX, Financial), a Coral Gables, Florida-based biopharmaceutical company focusing on the development of treatments for rare and debilitating chronic neuromuscular and neurological diseases.
The share price ($5.05 as of Sept. 17) is trading below the median historical valuation line ($5.91) and well below the Peter Lynch earnings line ($10.05), as the following chart exhibits.
The stock has a market capitalization of $510.77 million and a 52-week range of $2.88 to $6.24.
Catalyst Pharmaceuticals has a ROIC of 237.46%, which is more than 24.5 times the WACC of 9.58%.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $8.30 per share.
Green Plains Partners LP
The third stock that makes the cut is Green Plains Partners LP (GPP, Financial), an Omaha, Nebraska-based provider of fuel storage and transportation services in the U.S. for ethanol and other products.
The share price ($13.25 as of Sept. 17) trades below the Peter Lynch earnings line ($26.55) and the median historical valuation line ($15.69), as the chart below shows.
The stock has a market capitalization of $301.96 million and a 52-week price range of $6.51 to $13.74.
Green Plains Partners has a ROIC of 33.52%, which is about 5.2 times the WACC of 6.42%.
On Wall Street, the stock has one recommendation rating of buy with a target price of $16 per share.
Disclosure: I have no positions in any securities mentioned.
