When searching for opportunities among growing companies, investors could be interested in the following stocks since their share prices are trading lower than their Peter Lynch fair values.
The metric, which is based on the idea the fair price-earnings ratio for a growing company is on par with its growth rate, is derived from the combination of the following components:
- The stock's price-earnings to growth ratio.
- The stock's five-year Ebitda growth rate.
- The stock's earnings per share without non-recurring items for the trailing 12 months through the most recent quarter.
Asbury Automotive Group
The first stock that meets the criteria is Asbury Automotive Group Inc. (ABG, Financial), a Duluth, Georgia-based automotive retailer of new and used vehicles, spare parts and related services in the U.S.
On Friday, Asbury Automotive Group's shares closed at $182.07, below its Peter Lynch fair value of $349.15, for a price-to-Peter Lynch fair value ratio of about 0.52. This ranks better than 78.22% of the 225 companies that operate in the vehicles and parts industry.
The stock has a market capitalization of $3.52 billion after the share price recorded a 48.64% increase over the past year. The 52-week range is $112.76 to $230.965.
The stock has a median recommendation rating of overweight on Wall Street. The average target price is $252.38 per share.
Graham Holdings
The second stock that makes the cut is Graham Holdings Co. (GHC, Financial), an Arlington, Virginia-based provider of education and training services.
On Friday, Graham Holdings’ stock closed at $607.52, which is well below the Peter Lynch fair value per share of $2,529.13, yielding a price-to-Peter Lynch fair value ratio of approximately 0.24. This ranks better than 94.44% of the 54 companies that operate in the education industry.
The stock has a market capitalization of $3.01 billion following a 39.51% increase that occurred over the past year. The 52-week range is $422.84 to $685.
The stock has one recommendation rating of buy on Wall Street and a target price of $730 per share.
Sleep Number
The third stock that qualifies is Sleep Number Corp. (SNBR, Financial), a Minneapolis-based provider of sleep solutions and services in the U.S.
On Friday, Sleep Number’s shares closed at $87.23, below its Peter Lynch fair value per share of $184.25, for a price-to-Peter Lynch fair value ratio of about 0.45. This ranks higher than 77% of the 113 companies that operate in the furnishing, fixtures and appliances industry.
The stock has a market capitalization of $1.98 billion following a 41.58% increase over the past year. The 52-week range is $60.08 to $151.4399.
The stock has a median recommendation rating of hold with an average target price of $107.25 per share on Wall Street.
Malibu Boats
The fourth stock that qualifies is Malibu Boats Inc. (MBUU, Financial), a Loudon, Tennessee-based designer and manufacturer of recreational boats.
On Friday, Malibu Boats’ shares closed at $77.03, below its Peter Lynch fair value of $123.06, for a price-to-Peter Lynch fair value ratio of about 0.63. This ranks higher than 75.11% of the 225 companies that operate in the vehicle and parts industry.
The stock has a market capitalization of $1.61 billion following a 50.95% increase over the past year. The 52-week range is $49.63 to $93.
The stock has a median recommendation rating of buy with an average target price of $90.88 per share on Wall Street.
