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3 Stocks With Low PEG Ratios

They appear to be bargain opportunities based on their growth potential

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Dec 14, 2021
Summary
  • Amphastar Pharmaceuticals Inc., Johnson Outdoors Inc. and Meridian Bioscience 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 (PEG) ratios are at or below 1.5 as of Dec. 13, 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 share prices over the coming months.

Amphastar Pharmaceuticals Inc.

The first company that makes the cut is Amphastar Pharmaceuticals Inc. (

AMPH, Financial), a Rancho Cucamonga, California-based specialty pharmaceutical developer of injectable, inhalation and intranasal products for the treatment of several illnesses. These include deep vein thrombosis, asthma, adrenocortical insufficiency and transient episodes of a heart block.

As of Dec. 13, Amphastar Pharmaceuticals Inc. has a share price of $21.42, a price-earnings ratio of 29.81, a historical five-year Ebitda growth rate of 39.80% and an estimated future five-year earnings growth rate of 25%. Thus, the trailing 12-month PEG ratio is 0.75 and the forward PEG ratio is 1.2.

Since the share price has risen by 14% over the past year, the market capitalization now stands at $1.03 billion and the 52-week range is $16.91 to $21.70.

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GuruFocus assigned a score of 7 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 overweight with an average target price of $23.25 per share.

Johnson Outdoors Inc.

The second company that qualifies is Johnson Outdoors Inc. (

JOUT, Financial), a Racine, Wisconsin-based designer, manufacturer and marketer of camping, diving, personal watercraft and various marine electronics products.

As of Dec. 13, Johnson Outdoors Inc. has a share price of $97.80, a price-earnings ratio of 10.92, a historical five-year Ebitda growth rate of 26.30% and an estimated future five-year earnings growth rate of 14%. Thus, the trailing 12-month PEG ratio is 0.42 and the forward PEG ratio is 0.78.

Due to a 1.6% drop over the past year, the market capitalization is $991.10 million and the 52-week range is $95.65 to $154.18.

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GuruFocus assigned a score of 8 out of 10 for both the company's financial strength and its profitability.

On Wall Street, the stock has one recommendation rating of buy with a target price of $170 per share.

Meridian Bioscience Inc.

The third company that qualifies is Meridian Bioscience Inc. (

VIVO, Financial), a Cincinnati, Ohio-based developer and distributor of test kits to diagnose several infectious diseases and abnormal levels of lead in the blood.

As of Dec. 13, Meridian Bioscience Inc. has a share price of $18.02, a price-earnings ratio of 11.04, a historical five-year Ebitda growth rate of 13.40% and an estimated future five-year earnings per share growth rate of 17%. Thus, the trailing 12-month PEG ratio is 0.82 and the forward PEG ratio is approximately 0.65.

Following a 10.64% increase over the past year, the market capitalization is $774.71 million and the 52-week range is $17 to $30.65.

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GuruFocus assigned a score of 7 out of 10 for the company's financial strength and 8 out of 10 for its profitability.

On Wall Street, the stock has a median recommendation rating of buy with an average target price of $45 per share.

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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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