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.
Meta Platforms
The first stock that meets the criteria is Meta Platforms Inc. (META, Financial), a Menlo Park, California-based operator of social media platforms like Facebook, Instagram and WhatsApp.
The stock price ($169.27 per share on July 22) is trading below Peter Lynch's profit line ($198.3) and well below the median valuation line ($495.91).
The stock has a market capitalization of $450.18 billion and a 52-week range of $154.25 to $384.33.
The stock has a ROIC of 37.21%, while the WACC is 10.92%.
On Wall Street, the stock has a median recommendation rating of overweight and an average target price of $262.31 per share.
Mattel
The second stock that qualifies is Mattel Inc. (MAT, Financial), an El Segundo, California-based company that designs and produces toys and consumer products worldwide.
The stock price ($22.45 per share on July 22) is trading well below the Peter Lynch earnings line ($46.65) and well below the median historic valuation line ($48.28).
The stock has a market capitalization of $7.91 billion and a 52-week range of $17.945 to $26.99.
The stock has a ROIC of 31.21%, which is compared to the WACC of 8.34%.
On Wall Street, the stock has a median recommendation rating of buy and an average target price of $32.17 per share.
Algoma Steel Group
The third stock that makes the cut is Algoma Steel Group Inc. (ASTL, Financial), a Canadian steel company that supplies various steel products to a number of industries in North America. These industries include automotive companies, manufacturers of hollow construction products and transportation companies. Also road infrastructure builders, merchant shipping companies and manufacturers of military applications.
The stock price ($9.47 per share on July 22) is trading well below the Peter Lynch earnings line ($83.43) and slightly below the median historic valuation line ($10.60).
The stock has a market capitalization of $1.4 billion and a 52-week range of $7.75 to $13.65.
The stock has a ROIC of 69.40%, which is almost seven times the WACC of 10.12%.
On Wall Street, the stock has a median recommendation rating of overweight with an average target price of $18 per share.
