Looking for U.S.-listed equities that have the characteristics listed below represents a solid starting point when screening the market for potential value opportunities:
- The shares are trading near or below their intrinsic value, as indicated by the Peter Lynch earnings line.
- The return on invested capital exceeds the weighted average cost of capital, suggesting the company is creating value.
- The stock has optimistic recommendation ratings on Wall Street.
Thus, investors could be interested in the following stocks as they meet the above criteria.
Joann
The first stock that meets the criteria is Joann Inc. (JOAN, Financial), a Hudson, Ohio-based operator of 855 specialty retail stores across 49 states where people can purchase sewing and arts and crafts supplies.
The stock price ($12.98 per share on March 17) is trading well below Peter Lynch's profit line ($29.69), albeit slightly above the median valuation line ($8.81).
The stock has a market capitalization of $486.82 million and a 52-week range of $8.51 to $17.50.
The stock has a return on invested capital of 5.26%, while the weighted average cost of capital is 4.48%.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $13.57 per share.
Haverty Furniture
The second stock that qualifies is Haverty Furniture Companies Inc. (HVT, Financial), an Atlanta-based operator of 120 showrooms in 16 states in the southern and midwestern United States for the sale of home furniture and home accessories.
The stock price ($30.44 per share on March 17) is trading well below the median historic valuation line ($91.65) and well below the Peter Lynch earnings line ($73.65).
The stock has a market capitalization of $507.46 million and a 52-week range of $25.36 to $52.84.
The stock has a return on invested capital of 17.29%, which is more than two times the weighted average cost of capital of 7.68%.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $64 per share.
Sportsman's Warehouse
The third stock is Sportsman's Warehouse Holdings Inc. (SPWH, Financial), a West Jordan, Utah-based retailer of outdoor sporting products in the U.S.
The stock price ($11.73 per share on March 17) is trading well below the median historic valuation line ($22.03) and below the Peter Lynch earnings line ($26.7).
The stock has a market capitalization of $505.50 million and a 52-week range of $9.72 to $18.05.
The stock has a return on invested capital of 15.85%, which is almost five times the weighted average cost of capital of 4.95%.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $16.25 per share.
ChannelAdvisor
The third stock is ChannelAdvisor Corp. (ECOM, Financial), a Morrisville, North Carolina-based provider of customer experience-centric software applications for a wide range of businesses.
The stock price ($16.90 per share on March 17) is trading well below the median historic valuation line ($48.49) and below the Peter Lynch earnings line ($22.5).
The stock has a market capitalization of $519.55 million and a 52-week range of $15.6 to $29.41.
The stock has a return on invested capital of 46.16%, which is almost five times the weighted average cost of capital of 9.53%.
On Wall Street, the stock has a median recommendation rating of buy with an average target price of $29.40 per share.
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