Oct
27
Growth is good because it increases earnings meaningfully and lets the current P/E ratio go down. This is the reason investors pay 20, 50 or even 100 times of earnings for an investment. But you really make money if you buy a stock that beats analyst expectations and generates additional growth fantasies.
The market’s robust rally over the past few years has boosted valuations of many stocks. In particularly strong demand have been stocks that generate high earnings, which now have become priced well above the levels justified by their long-term growth potential. While it is getting more difficult to find appealing dividend stocks with reasonable valuations, there are still a few sound stocks that are trading at low PE and low PEG.
In this article, I argue that 3 stocks are trading at a significant discount, and based on past performance, have the potential to generate significant alpha returns.
Trinity Industries Inc (NYSE:TRN) is a diversified industrial company that owns businesses providing products and services to the energy, transportation, chemical and construction sectors. The Company’s products and services include railcars and railcar parts, the leasing, management, and maintenance of railcars, inland barges, highway products, aggregates, storage and distribution containers, structural wind towers, electric utility structures and parts and steel components.
As for a valuation, the company stands out based on average EPS growth over the past five years which was 45.90%. The stock with a market price of $27.01 and earnings of $4.64 per share has a P/E ratio of 5.82 and a low PEG ratio of 0.58. The stock is down -2.11% year-to-date and trades down -26.93% from highs printed in the last 52-week period.
Cal-Maine Foods Inc (NASDAQ:CALM) is a producer and marketer of shell eggs in the United States. The Company’s primary business is the production, grading, packaging, marketing and distribution of shell eggs. The Company sells its shell eggs in the southwestern, southeastern, mid-western and mid-Atlantic regions of the United States.
As for a valuation, the company’s annual EPS showed an increasing trend of 18.60% for the past five years. It has market cap at $2.71B with most recent closing price at $55.88. The stock is up 48.66% year-to-date and trades at an incredible 9.79 times earnings and has a low PEG ratio of 0.43.
Grupo Financiero Galicia S.A. (ADR) (NASDAQ:GGAL) is a financial services holding company. Banco de Galicia y Buenos Aires S.A. (Banco Galicia) is the Company’s largest subsidiary. Banco Galicia is a bank that provides, directly or through its subsidiaries, a range of financial products and services to large corporations, small and medium sized companies (SMEs).
As for valuation, the stock closed last trade at $23.99. During the past 5 years, the average earnings per share Growth Rate was 32.70%. The consensus price target for the stock is $31.00. The stock is priced at 3.93 P/E giving it a market capitalization of $3.62B. It has gained 51.58% year to date and is currently trading with a PEG of 0.09.
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