Value Ideas: Top 10 Options Market Picks Trading Well Below Target Price

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(Written by Alexander Crawford. Target price data sourced from Thomson/First Call (via Yahoo! Finance), options data sourced from Schaeffer’s.)

If you consider yourself a value investor, you might be interested in a list like this.

Value investors look for stocks that they believe are trading below their “fair value” with the belief that they’ll soon rise to that fair value, generating a profit for those investors savvy enough to foresee this happening. The catch is deciphering which stocks are indeed underpriced by the market.


Finding a Stock’s Fair Value

There are many ways to find a stock’s fair value, but one of the simplest proxies is analyst target price. This reflects analyst expectations of where the stock is headed within the next year, and if a stock is trading at a steep discount to this number, it may be currently undervalued.

Because target prices are notoriously inflated, it helps to focus on the most pessimistic (the lowest) target prices, as well as those with sufficient analyst coverage of 5 or more analyst ratings.

Investing Ideas

We ran a stock screen to illustrate these ideas, focusing on stocks currently favored by the options market. We screened for stocks seeing significant decreases in put/call ratio over the last ten trading days.

We screened these option market picks for those trading well below their most pessimistic (lowest) target prices, only focusing on stocks with 5 or more analyst ratings.

Do you think these stocks should be trading higher?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

List sorted alphabetically.

1. American Axle & Manufacturing Holdings Inc. (AXL): Engages in the manufacture, engineering, design, and validation of driveline and drivetrain systems, and related components and chassis modules for automotive industry in the United States. Of the 9 analysts that track the stock, the lowest price target stands at $11.00, which implies an upside of 29.87% from current levels around $8.47. Over the last two weeks, the stock's Put/Call ratio decreased from 0.22 to 0.13 (a bullish change).

2. Ducommun Inc. (DCO): Designs, engineers, and manufactures aerostructure, and electromechanical components and subassemblies. Of the 6 analysts that track the stock, the lowest price target stands at $16.00, which implies an upside of 29.87% from current levels around $12.32. Over the last two weeks, the stock's Put/Call ratio decreased from 0.13 to 0.09 (a bullish change).

3. Finish Line Inc. (FINL): Operates as a mall-based specialty retailer in the United States. Of the 12 analysts that track the stock, the lowest price target stands at $23.00, which implies an upside of 16.99% from current levels around $19.66. Over the last two weeks, the stock's Put/Call ratio decreased from 0.18 to 0.15 (a bullish change).

4. Halozyme Therapeutics, Inc. (HALO): Engages in the development and commercialization of recombinant human enzymes that transiently modify tissue under the skin to facilitate injection of other therapies or correct diseased tissue structures for clinical benefits. Of the 8 analysts that track the stock, the lowest price target stands at $10.00, which implies an upside of 20.48% from current levels around $8.30. Over the last two weeks, the stock's Put/Call ratio decreased from 0.26 to 0.21 (a bullish change).

5. HEALTHSOUTH Corp. (HLS): HealthSouth Corporation offers inpatient rehabilitative healthcare services in the United States and Puerto Rico. Of the 16 analysts that track the stock, the lowest price target stands at $22.00, which implies an upside of 20.95% from current levels around $18.19. Over the last two weeks, the stock's Put/Call ratio decreased from 0.53 to 0.19 (a bullish change).

6. InfoSpace Inc (INSP): Develops search tools and technologies that assist consumers with finding content and information on the Internet. Of the 5 analysts that track the stock, the lowest price target stands at $11.00, which implies an upside of 28.35% from current levels around $8.57. Over the last two weeks, the stock's Put/Call ratio decreased from 0.53 to 0.09 (a bullish change).

7. Mobile Telesystems OJSC (MBT): Provides telecommunications services primarily in the Russian Federation, Ukraine, Uzbekistan, Turkmenistan, Armenia, and Belarus. Of the 19 analysts that track the stock, the lowest price target stands at $16.00, which implies an upside of 19.94% from current levels around $13.34. Over the last two weeks, the stock's Put/Call ratio decreased from 0.29 to 0.24 (a bullish change).

8. Noranda Aluminum Holding Corp. (NOR): Engages in the production and sale of primary aluminum products and rolled aluminum coils in the United States. Of the 5 analysts that track the stock, the lowest price target stands at $10.00, which implies an upside of 17.65% from current levels around $8.50. Over the last two weeks, the stock's Put/Call ratio decreased from 0.18 to 0.1 (a bullish change).

9. WMS Industries Inc. (WMS): Engages in the design, manufacture, and distribution of games, video and mechanical reel-spinning gaming machines, and video lottery terminals (VLTs) for the legalized gaming industry worldwide. Of the 16 analysts that track the stock, the lowest price target stands at $22.00, which implies an upside of 18.85% from current levels around $18.51. Over the last two weeks, the stock's Put/Call ratio decreased from 1.5 to 0.51 (a bullish change).

10. TAL Education Group (XRS): Provides K-12 after-school tutoring services in the People's Republic of China. Of the 6 analysts that track the stock, the lowest price target stands at $12.60, which implies an upside of 27.92% from current levels around $9.85. Over the last two weeks, the stock's Put/Call ratio decreased from 14.12 to 0.25 (a bullish change). 



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 , Options , Stocks


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