4 Stocks Trading at a Discount

These stocks are potential bargains based on projected free cash flow

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Jun 24, 2022
Summary
  • Vermilion Energy Inc., NRG Energy Inc., Foot Locker Inc. and Anywhere Real Estate Inc. are trading below their projected free cash flow.
  • The predicted FCF model can be used to value companies with an erratic history of revenue and earnings growth.
  • Wall Street also likes these businesses.
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To increase your chances of finding a bargain, one method is to 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 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 recommendation ratings among sell-side analysts on Wall Street.

Vermilion Energy Inc.

The first company that meets the criteria is Vermilion Energy Inc. (

VET, Financial), a Canadian acquirer, explorer and developer of petroleum and natural gas resources in North America and internationally.

The stock closed at $17.01 per share on Thursday, which represents a discount to the projected free cash flow of $23.66 per share. The share price has risen by 86.92% over the past year for a market capitalization of $2.81 billion and a 52-week range of $5.51 to $25.40.

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GuruFocus has assigned a score of 5 out of 10 for the company's financial strength and 7 out of 10 for its profitability.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $29.11 per share.

NRG Energy Inc.

The second stock that makes the cut is NRG Energy Inc. (

NRG, Financial), a Princeton, New Jersey-based independent energy producer.

The stock closed at around $37.76 per share on Thursday, which represents a discount to the projected free cash flow of $98.31 per share. The price has fallen 1.9% over the past year for a market capitalization of $8.96 billion and a 52-week range of $34.70 to $47.82.

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GuruFocus has assigned a score of 5 out of 10 for the company's financial strength and 7 out of 10 for its profitability.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $44.94 per share.

Foot Locker Inc.

The third stock that qualifies is Foot Locker Inc. (

FL, Financial), a New York-based footwear and accessories company.

The stock traded at around $29.02 per share at close on Thursday, below the projected free cash flow of $87.01. The share price has fallen 54.22% over the past year for a market capitalization of $2.74 billion and a 52-week range of $26.36 to $63.98.

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GuruFocus has assigned a score of 6 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 hold with an average target price of $32.10 per share.

Anywhere Real Estate Inc.

The fourth stock that qualifies is Anywhere Real Estate Inc. (

HOUS, Financial), a Madison, New Jersey-based provider of residential real estate services comprising lead generation and relocation services and a full-service residential real estate brokerage. The company also provides property, escrow and settlement services to real estate and financial organizations, as well as property insurance related to residential and commercial real estate transactions.

The stock closed around $10.18 per share on Thursday, below the projected free cash flow of $52.34. The share price has dropped by 42.39% over the past year for a market capitalization of $1.20 billion and a 52-week range of $9.06 to $21.03.

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GuruFocus has assigned a score of 4 out of 10 for the company's financial strength and 7 out of 10 for its profitability.

On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $16 per share.

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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