Guru Stocks With Low PS Ratio, Wide Margin of Safety

Telecom Italia and Cummins are undervalued according to Peter Lynch earnings line

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Mar 23, 2016
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According to GuruFocus' All-in-One Screener, the following are companies with a market cap above $5 billion that are trading with a very low P/S ratio.

Telecom Italia SpA (TI) is trading at about $12 with a P/S ratio of 1 and an estimated forward P/E multiple of 11.68. The company has a market cap of $22.45 billion and over the last 10 years, the stock has dropped by 61%. During the last 52 weeks, the price has been as high as $14.18 and as low as $8.89.

The company is engaged in the communications sector and the fixed and mobile national and international telecommunications sector.

The DCF model gives a fair value of $1.54, estimating the stock is overpriced by 654%. The Peter Lynch earnings line suggests a fair price of $2.10.

The company’s largest shareholder among the gurus is Charles Brandes (Trades, Portfolio) with 0.22% of outstanding shares.

Principal Financial Group Inc. (PFG) is trading at about $12 with a P/S ratio of 1.01 and an estimated forward P/E multiple 8.85. The company has a market cap of $11.86 billion and over the last 10 years, the stock has dropped by 18%. During the last 52 weeks, the price has been as high as $58.02 and as low as $33.09.

The company offers retirement services, insurance solutions and asset management services. It provides financial products and services, including retirement, asset management, and insurance through the financial services companies to businesses, individuals and institutional clients.

The DCF model gives a fair value of $43.56, estimating the stock is undervalued with a margin of safety of 7%. The Peter Lynch earnings line suggests a bigger margin of safety with a fair price of $61.6.

The company’s largest shareholder among the gurus is Bill Nygren (Trades, Portfolio) with 1.58% of outstanding shares, followed by Mairs and Power (Trades, Portfolio) with 0.99%, Jeremy Grantham (Trades, Portfolio) with 0.07%, Manning & Napier Advisors with 0.02% and Ken Fisher (Trades, Portfolio) with 0.01%.

D.R. Horton Inc. (DHI) is trading at about $31 with a P/S ratio of 1.02 and an estimated forward P/E multiple of 11.78. The company has a market cap of $11.01 billion and over the last 10 years, the stock has dropped by 12%. During the last 52 weeks, the price has been as high as $33.10 and as low as $22.97.

The company constructs and sells homes under the names of D.R. Horton, America's Builder, Express Homes, Emerald Homes, Breland Homes, Regent Homes and Crown Communities.

The DCF model gives a fair value of $22.05, estimating the stock overpriced by 35%. The Peter Lynch earnings line suggests the stock is fairly priced giving a fair price of $30.

Ken Heebner (Trades, Portfolio) is the largest shareholder of the company among the gurus with 2.44% of outstanding shares, followed by Joel Greenblatt (Trades, Portfolio) with 0.61%, Jim Simons (Trades, Portfolio) with 0.24%, Ken Fisher (Trades, Portfolio) with 0.19% and Ray Dalio (Trades, Portfolio) with 0.05%.

PACCAR Inc. (PCAR) is trading at about $55 with a P/S ratio of 1.01 and an estimated forward P/E multiple of 14.31. The company has a market cap of $19.13 billion and over the last 10 years, the stock has risen by 74%. During the last 52 weeks, the price has been as high as $68.44 and as low as $43.46.

The company designs and manufactures heavy-duty diesel trucks, which are marketed under the Kenworth, Peterbilt and DAF nameplates.

The DCF model gives a fair value of $48.26 estimating the stock over priced by 13%. By contrast, the Peter Lynch earnings line gives a margin of safety giving a fair price of $67.7.

The company’s largest shareholder among the gurus is Chris Davis (Trades, Portfolio) with 1.1% of outstanding shares, followed by HOTCHKIS & WILEY with 0.83%, NWQ Managers (Trades, Portfolio) with 0.32%, Joel Greenblatt (Trades, Portfolio) with 0.26% and Jim Simons (Trades, Portfolio) with 0.19%.

Fidelity National Financial Inc. (FNF) is trading at about $33 with a P/S ratio of 1.02 and an estimated forward P/E multiple of 14.22. The company has a market cap of $11.35 billion and over the last 10 years, the stock has risen by 81%. During the last 52 weeks, the price has been as high as $40.25 and as low as $28.24.

It is a provider of title insurance, technology and transaction services to the real estate and mortgage industries.Â

The DCF model gives a fair value of $18.73, estimating the stock overpriced by 74%. The Peter Lynch earnings line suggests a fair price of $26.3.

Larry Robbins (Trades, Portfolio) is the largest shareholder of the company among the gurus with 0.63% of outstanding shares, followed by RS Investment Management (Trades, Portfolio) with 0.42%, Jim Simons (Trades, Portfolio) with 0.32%, John Keeley (Trades, Portfolio) with 0,05% and Paul Tudor Jones (Trades, Portfolio) with 0.01%.

Orange SAÂ (ORAN) is trading at $17.43 with a P/S ratio of 1.04 and an estimated forward P/E multiple of 11.96. The company has a market cap of $46.17 billion and over the last 10 years, the stock has dropped by 25%. During the last 52 weeks, the price has been as high as $18.32 and as low as $14.27.

The company is a services provider for multinational businesses under the Orange brand. The company offers its individual customers, businesses and other telecommunications operators a line of services.

The DCF model gives a fair value of $8.82, estimating the stock is overpriced by 98%. The Peter Lynch earnings line suggests a fair price of $12.2

Charles Brandes (Trades, Portfolio) is the largest shareholder of the company among the gurus with 0.12% of outstanding shares.

Cummins Inc. (CMI) is trading at about $110 with a P/S ratio of 1.02 and an estimated forward P/E multiple of 13.37. The company has a market cap of $19.08 billion and over the last 10 years, the stock has risen by 316%. During the last 52 weeks, the price has been as high as $143.40 and as low as $79.88.

The company designs and manufactures diesel and natural gas engines and engine-related component products.

The DCF model gives a fair value of $148.84, estimating the stock is undervalued with a margin of safety of 26%. The Peter Lynch earnings line suggests a smaller margin of safety giving a fair price of $117.

The company’s largest shareholder among the gurus is HOTCHKIS & WILEY with 3.31% of outstanding shares, followed by Bill Nygren (Trades, Portfolio) with 1.72%, First Eagle Investment (Trades, Portfolio) with 0.82%, T Rowe Price Equity Income Fund (Trades, Portfolio) with 0.44%, Pioneer Investments (Trades, Portfolio) with 0.43%, Joel Greenblatt (Trades, Portfolio) with 0.24% and Louis Moore Bacon (Trades, Portfolio) with 0.12%.