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3 Stocks Trading Around Peter Lynch Fair Value

These companies are potential value opportunities

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May 17, 2022
Summary
  • PulteGroup, JPMorgan Chase and Vipshop are trading below or around their Peter Lynch fair values.
  • The metric is based on the idea that the fair price-earnings ratio for a growing company is on par with its growth rate.
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When searching for opportunities among growing companies, investors could be interested in the following stocks, since their share prices are trading near or below their Peter Lynch fair values.

This metric, which is based on the idea that 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.

PulteGroup

The first stock that meets the criteria is PulteGroup Inc. (

PHM, Financial), an Atlanta-based residential construction company.

On Monday, PulteGroup’s shares closed at $42.73, below its Peter Lynch fair value of $204, for a price-to-Peter Lynch fair value ratio of about 0.21. This ranks better than 76.32% of the 38 companies that operate in the homebuilding and construction industry.

The stock has a market capitalization of $10.29 billion after the share price has decreased by 22.64% over the past year. The 52-week range is $39.61 to $58.83.

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The stock has a median recommendation rating of overweight on Wall Street. The average target price is $57.77 per share.

JPMorgan Chase

The second stock that makes the cut is JPMorgan Chase & Co. (

JPM, Financial), a major U.S. bank.

On Monday, JPMorgan Chase’s stock closed at $118.26, which was well below the Peter Lynch fair value per share of $102.60, yielding a price-to-Peter Lynch fair value ratio of approximately 1.18. That's worse than 68.6% of all companies in the banking industry, which is large with 860 banks.

The stock has a market capitalization of $356.73 billion following a 25.33% decrease that occurred over the past year. The 52-week range is $115.37 to $172.96.

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The stock has a median recommendation rating of overweight on Wall Street and an average target price of $155.93 per share.

Vipshop Holdings

The third stock that qualifies is Vipshop (

VIPS, Financial), a Chinese internet retailer for various brands.

On Monday, Vipshop’s shares closed at $8.14, below its Peter Lynch fair value per share of $26.04, for a price-to-Peter Lynch fair value ratio of about 0.32. This ranks higher than 90.32% of the 310 companies that operate in the retail-cyclical industry.

The stock has a market capitalization of $5.54 billion following a 65.78% decrease over the past year. The 52-week range is $5.75 to $25.24.

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The stock has a median recommendation rating of overweight with an average target price of about $9.8 per share on Wall Street.

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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