Picking U.S.-listed equities that have the characteristics listed below represent a solid starting point when screening the market for potential value opportunities, in my opinion:
- The shares are trading close to or below their intrinsic value based on the Peter Lynch value.
- The return on invested capital exceeds the weighted average cost of capital, which means the companies are creating value.
- The stock has optimistic recommendation ratings on Wall Street.
Thus, investors could be interested in the following stocks since they meet the above criteria.
Mobile TeleSystems
The first company that makes the cut is Mobile TeleSystems PJSC (MBT, Financial), a Russian domestic provider of telecommunication services.
The share price ($9.34 as of Oct. 22) is below the Peter Lynch earnings line ($14.75) and the median historical valuation line ($10.30), as the following chart shows.
The stock has a market capitalization of $8.06 billion and a 52-week price range of $7.72 to $10.075.
The stock has a ROIC of 11%, which is still higher than the WACC of 10%.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of approximately $11.20 per share.
MasterCraft Boat Holdings
The second stock that meets the criteria is MasterCraft Boat Holdings Inc. (MCFT, Financial), a Vonore, Tennessee-based manufacturer of recreational powerboats.
The share price ($26.44 as of Oct. 22) is trading below the median historical valuation line ($44.55) and well below the Peter Lynch earnings line ($46.71), as the following chart exhibits.
The stock has a market capitalization of $502.96 million and a 52-week range of $18.48 to $33.63.
The stocks has a ROIC of 30%, which is more than double the WACC of 13.5%.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $37.25 per share.
Nautilus
The third stock that qualifies is Nautilus Inc. (NLS, Financial), a Vancouver, Washington-based seller of cardio and strength fitness products for consumer and commercial use in North America and internationally.
The share price ($10.34 as of Oct. 22) is trading below the median historical valuation line ($58.68) and well below the Peter Lynch earnings line ($49.8), as the following chart illustrates.
The stock has a market capitalization of $319.82 million and a 52-week range of $8.95 to $31.38.
The stock has a ROIC of 87.7%, which is nearly seven and half times the WACC of 11.85%.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $19.13 per share.
