3 Undervalued Stocks With Great Growth Prospects

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Compiled by Luis Gonzalez: This list might offer an interesting starting point to a value-oriented investor.

This is a list of undervalued stocks, with Price to Free Cash Flow ratios under 5 (which means that free cash flow makes up more than 20% the company's market cap).

In addition, all of the names mentioned below have excellent growth prospects, with higher projected EPS growth and capital spending rates than their industry competitors.

We're not going to go into detailed analysis for each company. The goal here is to give growth-oriented investors a starting point for their own analysis.

All growth stats sourced from Fidelity, short float and performance data sourced from Finviz.

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1. China Unicom Limited (CHU): Wireless Communications Industry. Market cap of $39.94B. P/FCF ratio at 3.75.

EPS have grown by 7.03% over the last five years vs. industry average at 2.46%. EPS projected to grow by 32.5% over the next five years vs. industry average at 11.85%. Revenue has grown by 18.66% over the last five years vs. industry average at 9.44%. Capital spending has grown by 37.66% over the last five years vs. industry average at 10.94%. The company's cash flow has grown by 23.6% over the last five years vs. industry average at 7.55%.

Short float at 0.57%, which implies a short ratio of 1.78 days. The stock has gained 57.24% over the last year.

Other Highlights:

- The company has low debt, which significantly reduces its risk over the coming months. During the most recent quarter, the total Debt/Assets ratio stood at 18.00% vs. the industry average at 31.54%. Total Debt/Equity came in at 36.77%, lower than the industry average at 91.1%.

- The company seems to be doing a good job managing its inventory and receivables, which provides more evidence of a solid management team. Trailing twelve month Inventory Turnover ratio came in at 48.02, higher than the industry average at 39.81, while trailing twelve month receivables turnover came in at 15.63 vs. the industry average at 8.35.

2. China Life Insurance Co. Ltd. (LFC): Life Insurance Industry. Market cap of $107.99B. P/FCF ratio at 3.83.

EPS have grown by 39.22% over the last five years vs. industry average at 1.63%. EPS projected to grow by 11.16% over the next five years vs. industry average at 10.84%. Revenue has grown by 39.89% over the last five years vs. industry average at 5.77%. Capital spending has grown by 32.45% over the last five years vs. industry average at 2.29%. The company's cash flow has grown by 39.46% over the last five years vs. industry average at 4.36%.

Short float at 0.25%, which implies a short ratio of 3.07 days. The stock has lost -8.55% over the last year.

3. China Southern Airlines Co. Ltd. (ZNH): Major Airlines Industry. Market cap of $3.9B. P/FCF ratio at 3.17.

EPS have grown by 51.28% over the last five years vs. industry average at -3.06%. EPS projected to grow by 72.4% over the next five years vs. industry average at 10.89%. Revenue has grown by 22.62% over the last five years vs. industry average at 10.49%. Capital spending has grown by 22.37% over the last five years vs. industry average at 8.32%. The company's cash flow has grown by 26.71% over the last five years vs. industry average at -3.78%.

Short float at 0.6%, which implies a short ratio of 3.4 days. The stock has gained 42.72% over the last year.

Other Highlights:

- When compared to industry competitors, the company reported better than average profit margins during the most recent quarter. Gross margins came in at 24.46%, higher than the industry average at 13.98% (most recent quarter, annualized). Operating margin came in at 4.65%, lower than the industry average at 7.08%, while net profit margin came in at 4.65% vs. the industry average at 7.08%.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks

Referenced Stocks: CHU , LFC , ZNH

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