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 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.