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A Trio of Stocks With Low PEG Ratios

They appear as bargain opportunities based on forward and 12-month metrics

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Nov 08, 2021
Summary
  • Schnitzer Steel Industries Inc, Federal Agricultural Mortgage Corp and KKR Real Estate Finance Trust Inc look underestimated by the market.
  • At 1.5 or less, their trailing 12-month and forward price-earnings to growth ratios are more attractive than the S&P 500's historical average.
  • Wall Street sell-side analysts have also issued positive recommendation ratings for these stocks.
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When screening the market for bargain opportunities, investors may want to look for stocks whose trailing 12-month and forward price-earnings to growth ratios are at or below 1.5 as of Nov. 5, 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.

The three stocks listed below meet the above criteria. Wall Street has also issued positive recommendation ratings for these stocks, meaning that analysts expect higher shares prices over the coming months.

Schnitzer Steel Industries Inc

The first company that makes the cut is Schnitzer Steel Industries Inc (

SCHN, Financial), a Portland, Oregon-based global manufacturer of finished steel products and operator of ferrous and nonferrous scrap metals recycling facilities.

As of Nov. 5, Schnitzer Steel Industries Inc has a share price of $52.39, a price-earnings ratio of 9.32, a historical five-year Ebitda growth rate of 20.50% and an estimated future five-year earnings growth rate of 10%. Thus, the trailing 12-month PEG ratio is 0.45 and the forward PEG ratio is 0.932.

Since the share price has risen by 135.35% over the past year, the market capitalization now stands at $1.44 billion and the 52-week range is $21.32 to $59.34.

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GuruFocus assigned a score of 6 out of 10 for the company's financial strength and its profitability.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $72 per share.

Federal Agricultural Mortgage Corp

The second company that qualifies is Federal Agricultural Mortgage Corp (

AGM, Financial), a Washington, D.C.-based provider of a secondary market for agricultural loans-backed securities.

As of Nov. 5, Federal Agricultural Mortgage Corp has a share price of $133.91, a price-earnings ratio of 14.26, a historical five-year book value growth rate of 11.30% and an estimated future five-year earnings growth rate of 11%. Thus, the trailing 12-month PEG ratio is 1.26 and the forward PEG ratio is 1.30.

Due to a 92% rise over the past year, the market capitalization is $1.42 billion and the 52-week range is $65.51 to $134.84.

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GuruFocus assigned a score of 2 out of 10 for the company's financial strength and 6 out of 10 for its profitability.

On Wall Street, the stock has one recommendation rating of hold with a target price of $117 per share.

KKR Real Estate Finance Trust Inc

The third company that qualifies is KKR Real Estate Finance Trust Inc (

KKR, Financial), a New York-based private equity and real estate investment firm specializing in direct and fund investments.

As of Nov. 5, KKR Real Estate Finance Trust Inc has a share price of $21.83, a price-earnings ratio of 10.25, a historical five-year book value growth rate of 27% and an estimated future five-year earnings per share growth rate of 33.33%. Thus, the trailing 12-month PEG ratio is 0.38 and the forward PEG ratio is approximately 0.31.

Following a 24.25% increase over the past year, the market capitalization is $1.33 billion and the 52-week range is $36.27 to $83.90.

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GuruFocus assigned a score of 2 out of 10 for the company's financial strength and 4 out of 10 for its profitability.

On Wall Street, the stock has a median recommendation rating of buy with an average target price of $88.92 per share.

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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