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Top 20 Undervalued Stocks by Market Cap Class September 2021 Industrials Sector

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What are the top 25 Undervalued Stocks (selected over 5 market cap classes) in the Industrials Sector? I have used the analysis tools on the website stockcalc.com to generate the content of this blog post. Have a look down the Welcome page www.stockcalc.com/Welcome for some of the free lists and reports available.

Or start your StockCalc 30 Day Free Trial

Undervalued Stocks – Industrials Sector

Today our focus is the Industrials sector and we are looking at companies that are undervalued based on our Weighted Average Valuation (WAV) calculation which we do for the 8000 stocks each night in the StockCalc database.

The Industrials sector is comprised of companies in the following Industries: Aerospace & Defense, Airlines, Railroads, Marine Shipping, Trucking, Logistics, Engineering & Construction, Building Products & Equipment, Metal Fabrication, Waste Management and a number of similar industries. This sector includes companies that manufacture, provide services, staffing and employment, manage infrastructure, distribute and supply industrial equipment, air services, transportation or trucking of freight and people.

The stocks in this sector are held for both their dividends and capital appreciation.

We generate our Weighted Average Valuation (WAV) from 5 models and Analyst consensus. Overview of the models used: Discounted Cash Flow (DCF value) is a valuation technique where cash flow projections are discounted back to the present to calculate value per share. A Comparables model values the company on the basis of ratios from selected comparable companies. We actually do 3 types of comparables models. An Adjusted Book Value (ABV) is calculated by multiplying book value per share by its historical Price to Book ratio. If we have Analyst coverage we look at the consensus target price.

Today’s Data – Industrials

In the table below we can see the close price (Sep 17th 2021) and valuation for these companies along with the ratio of valuation to price as well as their market cap class and average trading volume.

Stock Symbol Company Name Close Price($) Valuation ($) Value/ Price M Cap Class Average Volume
GPN-N Global Payments 162.03 221.14 1.36 Large Cap 2049742
LHX-N L3Harris Technologies 222.46 257.79 1.16 Large Cap 2215142
UPS-N United Parcel Service 190.03 218.97 1.15 Large Cap 4481977
NOC-N Northrop Grumman 350.24 399.46 1.14 Large Cap 1893712
PCAR-Q PACCAR 81.55 92.25 1.13 Large Cap 4593971
AL-N Air Lease 37.81 49.00 1.30 Mid Cap 1442324
SNDR-N Schneider National 22.38 27.15 1.21 Mid Cap 868646
HII-N Huntington Ingalls Indus 194.99 231.67 1.19 Mid Cap 467525
ENS-N EnerSys 75.84 88.47 1.17 Mid Cap 820547
TKR-N Timken 67.42 77.98 1.16 Mid Cap 1007003
CSTE-Q Caesarstone 13.08 18.78 1.44 Small Cap 220622
KNOP-N KNOT Offshore Partners 18.12 25.00 1.38 Small Cap 64206
PAE-Q PAE 5.90 8.15 1.38 Small Cap 1030060
PRIM-Q Primoris Services 26.14 35.70 1.37 Small Cap 557053
CHR-T Chorus Aviation 3.87 5.19 1.34 Small Cap 695318
LMB-Q Limbach Holdings 6.46 12.98 2.01 Micro Cap 98459
VTSI-Q VirTra 8.96 11.61 1.30 Micro Cap 75431
POWL-Q Powell Industries 23.25 30.07 1.29 Micro Cap 477188
APT-A Alpha Pro Tech 7.90 9.97 1.26 Micro Cap 446137
WLFC-Q Willis Lease Finance 36.01 43.35 1.20 Micro Cap 76317
DSS-A Document Security Systems 1.33 2.72 2.05 Nano Cap 2086498
AIRI-A Air Industries 1.10 1.14 1.04 Nano Cap 236512

N-NYSE, Q-Nasdaq, A-American, T-Toronto, X-Toronto Venture

Lets look at a few companies…

Lets look at a couple of the companies on this list to get a better understanding of them.

L3Harris Technologies

https://www.l3harris.com
Harris Corp develops, manufactures and sells technology-based solutions that serve government and commercial customers’ mission-critical challenges. Its products include communications systems, serving defense and public safety networks amongst othe

Schneider National

https://www.schneider.com
Schneider National Inc. provides transportation and logistics services. The company delivers broad portfolio of premier truckload, intermodal and logistics solutions and operating for-hire trucking fleets in North America.

VirTra

https://www.virtra.com
VirTra Inc is engaged in the sale and development of judgmental use of force training simulators and firearms training simulators for law enforcement, military and commercial uses.

The content presented here is in part from the website stockcalc.com and is provided on an as is or as available basis with all faults and may not be current in all cases. You should not rely on any of the information as authoritative or as a substitute for the exercise of your own skill and judgment in making an investment decision.

Uncategorised, Undervalued Stocks, Valuation

Top 20 Undervalued Stocks by Market Cap Class March 2021: Health Care

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What are the top 20 Undervalued Stocks (selected over 5 market cap classes) in the Health Care Sector? I have used the analysis tools on the website stockcalc.com to generate the content of this blog post. Have a look down the Welcome page www.stockcalc.com/Welcome for some of the free lists and reports available.

Or start your StockCalc 30 Day Free Trial

Undervalued Stocks – Health Care Sector

Today our focus is the Health Care sector and we are looking at companies that are undervalued based on our Weighted Average Valuation (WAV) calculation which we do for the 8000 stocks each night in the StockCalc database. The Health Care sector is comprised of companies in the following Industry groups: Biotechnology, Drug Manufacturers, Healthcare Plans, Providers & Services, Medical Devices, Instruments, Diagnostics, Research and Distribution. Companies in this Sector range in activities from research and discovery through to development and production of innovative drug and drug related technologies. They also include medical software, diagnostics, equipment, retail drug sales through to managed health products and services. The mature companies in this sector tend to have steady revenues and earnings through the economic cycles. The stocks are also held for their dividends.

We generate our Weighted Average Valuation (WAV) from 5 models and Analyst consensus. Overview of the models used: Discounted Cash Flow (DCF value) is a valuation technique where cash flow projections are discounted back to the present to calculate value per share. A Comparables model values the company on the basis of ratios from selected comparable companies. We actually do 3 types of comparables models. An Adjusted Book Value (ABV) is calculated by multiplying book value per share by its historical Price to Book ratio. If we have Analyst coverage we look at the consensus target price.

Today’s Data – Health Care

In the table below we can see the close price (Mar 15th 2021) and valuation for these companies along with the ratio of valuation to price as well as their market cap class and average trading volume.

Symbol Company Name Close Price($) Valuation ($) Value/ Price Class Average Volume
GRFS-Q Grifols 16.05 25.46 1.59 Large Cap 1252042
REGN-Q Regeneron Pharmaceuticals 483.94 670.01 1.38 Large Cap 725117
VRTX-Q Vertex Pharmaceuticals 219.65 281.29 1.28 Large Cap 1539755
FMS-N Fresenius Medical Care 36.32 45.43 1.25 Large Cap 514545
GSK-N GlaxoSmithKline 35.88 44.13 1.23 Large Cap 6011590
OPK-Q OPKO Health 4.72 6.11 1.29 Mid Cap 9264797
CMD-N Cantel Medical 78.43 100.00 1.28 Mid Cap 755123
GLPG-Q Galapagos 83.08 106.05 1.28 Mid Cap 142367
SAGE-Q Sage Therapeutics 79.32 99.00 1.25 Mid Cap 400545
EXEL-Q Exelixis 24.17 29.91 1.24 Mid Cap 2098945
SUPN-Q Supernus Pharmaceuticals 26.80 54.25 2.02 Small Cap 282360
CPRX-Q Catalyst Pharmaceuticals 3.94 7.27 1.84 Small Cap 1443936
CHRS-Q Coherus BioSciences 15.86 27.37 1.73 Small Cap 823515
CO-N Global Cord Blood 4.58 6.66 1.45 Small Cap 59174
GUD-T Knight Therapeutics 5.20 7.19 1.38 Small Cap 508236
HAPP-Q Happiness Biotech Gr 2.08 3.97 1.91 Micro Cap 316488
DR-T Medical Facilities 6.76 9.30 1.38 Micro Cap 77223
VYGR-Q Voyager Therapeutics 5.80 6.77 1.17 Micro Cap 422267
LABS-T MediPharm Labs 0.53 0.61 1.16 Micro Cap 4424442
CRHM-A CRH Medical 3.89 4.45 1.14 Micro Cap 375956
DN-T Delta 9 Cannabis 0.52 0.57 1.10 Nano Cap 245179

N-NYSE, Q-Nasdaq, A-American, T-Toronto, X-Toronto Venture

Lets look at a few companies…

Lets look at a couple of the companies on this list to get a better understanding of them.

Regeneron Pharmaceuticals

http://www.regeneron.com
Regeneron Pharmaceuticals Inc is an integrated biopharmaceutical company. It discovers, invents, develops, manufactures, and commercializes medicines for the treatment of serious medical conditions.

Cantel Medical

http://www.cantelmedical.com
Cantel Medical Corp is dedicated in delivering infection prevention products and services for patients, caregivers, and other healthcare providers which improve outcomes, enhance safety and help save lives.

Medical Facilities

https://www.medicalfacilitiescorp.ca
Medical Facilities Corp is engaged in controlling interests, through its subsidiaries, in specialty hospitals and an ambulatory surgery center. The specialty surgical hospitals perform scheduled surgical, imaging and diagnostic procedures.

Generate lists and valuations like this in StockCalc – have a look here (Free Trial)

Uncategorised, Valuation

Lowes Companies Inc. (LOW) Fundamental Valuation using Analyst Forecast Data

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I used the Stockcalc website (www.stockcalc.com) to run a fundamental analysis for Lowes Companies (LOW:NYS)

Process:
I ran a Weighted Average Cost of Capital with the WACC Tool
I loaded the Analyst Estimate Data and used it to generate an Income Statement Forecast for 2016 to 2018
I then ran a Discounted Cash Flow with that Data.

The following screens show the steps:

Calculation of WACC for LOW:NYS

Lowes Companies WACC
The weighted average cost of capital for Lowes Companies (LOW:NYS)

This resulted in a WACC value of 8.78 for Lowes Companies Inc.

Next I loaded the Analyst Estimate Data and used it to generate an Income Statement Forecast for 2016 to 2018

LOW Analyst Estimates
Average Analyst Estimates for Lowes Companies Inc. (LOW:NYS)

 

LOW:NYS Income Statement
Income Statement Forecast for Lowes Companies Inc. (LOW:NYS)

 

I then loaded a Discounted Cash Flow using the above inputs

LOW:NYS DCF
Discounted Cash Flow Analysis for Lowes Companies (LOW:NYS)

Note – Stockcalc provides default or historic values to generate the initial valuation calculation- the user can then adjust based on their expectations:

Adjustments:
The cash flow values were taken directly from the Analyst estimates.  I reviewed the historic Capex figures and adjusted the ongoing Capital Expenditures to 0.9 billion from an average of 1.2 billion last 5 years based predominately on the last 2 years figures of 0.9 and 0.8 billion.  I also adjusted the terminal growth rate from the default of 3.0 to 3.4 given the Analyst projection for the next 3 years are 11% growth in EBITDA. These 2 adjustments resulted in a value of $74 per share.  I am not aware if there are redundant assets that would add to  company value.

The Analyst Mean Target Price for 2017 is $80.86.  This can be seen on the Average Analyst Estimates above.  To achieve that value I would need to increase the terminal value to 4.0 % per year in the discounted cash flow model.

Company Information:
Lowe’s Companies Inc. was incorporated in North Carolina in 1952 and has been publicly held since 1961. It is a Fortune(r) 100 company and a home improvement retailer. As of January 31, 2014, Lowe’s operated 1,832 home improvement and hardware stores in the United States, Canada and Mexico representing approximately 200 million square feet of retail selling space. The Company serves homeowners, renters and commercial business customers (Pro customer).

About Stockcalc:
If you would like to explore the Stockcalc website and quickly run valuations like  simply create an account at www.stockcalc.com .  Use the walk-throughs (click the walking man icon), videos (video icon on each page) or the help menu to help navigate the site. The site has a number of tools for data query, backtesting, forecasting and valuation.  We have a no restrictions 14 day free trial available. If you would like the above valuation to test simply send us a note from Stockcalc’s “Contact Us” on the dashboard.

 

 

 

 

Uncategorised, Valuation

How sensitive are companies to rising interest rates?

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The talk of will they or won’t they raise rates has been ongoing for more than 2 years now.  We have to expect either rates get raised at some point, we stumble along on the current path or we end up in deflationary times.  I want to explore the more optimistic of these scenarios and its impact on stock valuations: the economy improves and rates start to rise.

To look at this in detail I am using www.stockcalc.com  (Disclaimer: I am the President of Patchell Brook Equity Analytics and we created Stockcalc.com precisely for this type of analysis and valuation)

I will examine Caterpillar as it has with a 59/41 Equity to Debt in the Capital Structure

Using Stockcalc I first create and save a WACC for CAT:  (Research Menu, Valuation, WACC).  Stockcalc does a first pass on WACC using default values which results in a WACC of 8.93.

Cost of Equity (Ke) 13.63 (Using CAPM), After Tax cost of Debt : 2.17, 59% Equity, 41% Debt

 

WACC for CAT

Next I load the Quick DCF tool  so I can run the analysis (Research, Forecast, Analyst) (Note – the quick DCF is a testing and teaching tool, the other tools are more detailed in their analysis)

It is available for free at www.stockcalc.com/dcf.aspx or inside the Stockcalc.Com website

Quick DCF for CAT

Value Per Share ($) Calculations for Caterpillar (CAT:NYS) using the Quick DCF tool on Stockcalc.com

Each change in WACC (8.93 – 9.34 – 9.75) implies a 1 % change in Cost of Debt.  Growth rates are next 3 years and thereafter (5% and 3% in the first row for ex)

WACC 8.93 9.34 9.75
Growth rates 5,3% 70.02 61.28 53.60
Growth rates 6,4% 97.40 84.92 74.21
Growth rates 4,2% 50.55 44.08 38.30

(Current Price at the time of valuation (October 2015) was $69.34)

A 1% change in the Cost of Debt results in a 12.5% change in value per share.  A 1% change in Growth rates results in a 28% change in Value per Share.  A 1% change in WACC results in a similar 28% change in Value per Share.

Message: if interest rates are rising, growth prospects need to be rising at half the rate to keep this share price holding steady.

 

If you want to explore the Stockcalc software simply create an account at www.stockcalc.com and have a look around.  Use the walk-throughs (click the walking man icon), videos (video icon on each page) and  help menu to understand and navigate the site.  The site contains a number of tools including screens, queries, backtests, forecasts and a variety of valuation methods.

 

 

Uncategorised, Valuation

It used to be a 6$ stock…

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Checking Price versus Market Cap

I often see on chat rooms and bullboards investors discussing small caps with phrases like “but it used to be a 6 $ stock – I’ll buy it and wait for it to get back there”

Should they be looking at Price or Market Cap?

Price vs Market Cap
Price vs Market Cap

Side note: Here is an overview of Price vs Market cap from Khan Academy:

https://www.khanacademy.org/video/price-and-market-capitalization

In some sectors, notably junior mining companies, you need to look at Market Cap (Stock Price * Number of Shares outstanding) instead of share price as a potential upside if conditions return.  Every time one of these junior companies does a reverse split it affects the market cap but may not be reflected in the price over time given their nature to fall off dramatically in tough times.

As a note, any company that goes through a reverse split falls for this math so if you think of buying a company because it “used to be a 6$ stock” please look to see if any reverse splits have occurred.

Here is a example of a small Canadian junior gold company that I ran using the www.stockcalc.com  website – It hit a high of 12 Million market cap in 2008 and the adjusted stock price at that time was in the 1.20$ range (I say adjusted because as each reverse split occurs in order to have apples and apples the charts need to be adjusted to reflect the splits)

The company is currently trading at 13 cents with a market cap of less than 3.5 million.

Market Cap

BMG Market Cap 2008 2015

Let look at 3 points in time here with the share consolidations accounted for:

Jan 1 2010: Market Cap 5.5 Million, Price 57 cents
Jan 1 2014: Market Cap 1.0 Million, Price 10 cents
Jan 1 2015: Market Cap 3.4 Million, Price 13 cents

From these we can calculate the (adjusted) # of shares as 10 Million each of 2010, 2014 and 26 Million in 2015.  The company did a reverse split mid 2014 followed by a number of private placements.

Price – This chart shows the adjusted close prices for the company from 2008 to mid 2015.

BMG Close price 2008 2015

Here is a zoomed in version of the price chart

BMG Close price 2008 2015 zoomed

So if we wanted to speculate thinking conditions were going to turn around for this junior mining company, how high could the share price go based on historical values?

If we look at the price chart we see the company would have been in the 50 to 60 cent range during 2010-2011 and may speculate it could return there if gold prices reverse higher. This would be a 4-5 times return compared to the 13 cents currently.

Conversely if we look at Market Cap:  after the split Market Cap was 3.4 million. To return to the 5.5 million range we see a  60% return.

i.e if the company returned to full value as expressed by 2010-11 market cap it would only rise to  21 cents, not the 50 to 60 cent range it had seen previously.

Yes it is intuitive, just something to keep on your radar when looking at these smaller stocks.

 

If you want to explore the Stockcalc software simply create an account at www.stockcalc.com and have a look around.  Use the walk-throughs (click the walking man icon), videos (video icon on each page) or the help menu to help understand and navigate the site.