To increase your chances of finding a bargain, you can screen the market for stocks that are trading at a discount to their estimated intrinsic values as calculated by the projected free cash flow valuation model.
Unlike the discounted cash flow or discounted earnings valuation models, the projected free cash flow model allows investors to estimate the value of the companies whose earnings and profits are not regular and may also show losses in some quarters. Projected FCF uses normalized free cash flow and book value.
The following stocks appear to be undervalued by the market according to the projected FCF model. They also have positive recommend ratings among sell-side analysts on Wall Street.
Itau Unibanco
The first company that meets the criteria is Itau Unibanco Holding SA (ITUB, Financial), a Brazilian regional bank.
The stock closed at $4.79 per share on Friday, which represents a discount to the projected free cash flow of $10.77 per share. The share price has risen by 10.77% over the past year for a market capitalization of $45.13 billion and a 52-week range of $3.60 to $6.76.
GuruFocus has assigned a score of 4 out of 10 for the company's financial strength and 5 out of 10 for its profitability.
On Wall Street, the stock has a recommendation rating of buy with a target price of $5 per share.
Synchrony Financial
The second stock that makes the cut is Synchrony Financial (SYF, Financial), a Stamford, Connecticut-based credit services company focused on financial products and services for U.S. consumers.
The stock closed at around $36.81 per share on Friday, which represents a discount to the projected free cash flow of $211.19 per share. The price has fallen 15.54% over the past year for a market capitalization of $18.46 billion and a 52-week range of $33.75 to $52.49.
GuruFocus has assigned a score of 4 out of 10 for the company's financial strength and 6 out of 10 for its profitability.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $49.79 per share.
Cemex
The third stock that qualifies is Cemex SAB de CV (CX, Financial), a Mexican producer and distributor of cement and other building materials.
The stock closed around $4.40 per share on Friday, below the projected free cash flow of $6.82. The share price has fallen 46.92% over the past year for a market capitalization of $6.36 billion and a 52-week range of $4.14 to $9.09.
GuruFocus has assigned a score of 4 out of 10 for the company's financial strength and 5 out of 10 for its profitability.
On Wall Street, the stock has a median recommendation rating of buy with an average target price of $7.85 per share.
Methanex
The fourth stock that qualifies is Methanex Corp. (MEOH, Financial), a Canadian producer and supplier of methanol in North America and internationally.
The stock closed around $50.16 per share on Friday, below the projected free cash flow of $112.17. The share price has risen by 35.84% over the past year for a market capitalization of $3.72 billion and a 52-week range of $29.61 to $56.79.
GuruFocus has assigned a score of 5 out of 10 for the company's financial strength and 9 out of 10 for its profitability.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $57.83 per share.
