For Immediate Release
Chicago, IL - March 26, 2012 - Today, Zacks Investment Ideas
feature highlights Features:
Grupo Galicia
(
GGAL
),
Seagate Technology
(
STX
) and
Gulfport Energy
(
GPOR
).
3 Stocks with Magic PEG Ratios
Value investors have long looked to the price-to-earnings ratio
as a means to finding value stocks. However, Benjamin Graham, long
considered to be the "father" of value investing, found that a low
price-to-earnings ratio wasn't enough to unearth the true
undervalued companies.
Graham combined the low price-to-earnings ratios with the power
of growth by using the PEG ratio. The PEG ratio is calculated by
taking the price-to-earnings (P/E) ratio and dividing it by the
growth rate.
Normally, a stock with a PEG ratio under 1.0 is considered a
"value". However, despite the stock rally in 2012, there are quite
a few stocks that are trading with PEG ratios far, far lower than
1.0.
Screening for PEG
I created a screen for PEG ratios under 0.25, which would be an
extremely low PEG ratio, on Zacks free Custom Screener.
Just this one criteria gave me 44 stocks. That's not too
shabby.
But all 44 companies are not necessarily good value stocks. I
eliminated companies that had a Zacks rank of 4 or 5 and then
considered other fundamentals such as earnings surprises, return on
equity and earnings history.
3 Stocks with Low PEG Ratios and Solid Value
Fundamentals
The following 3 companies stood out because they had both
stellar value fundamentals, including a low PEG ratio, and a solid
business story, including earnings growth.
1. Grupo Galicia
2. Seagate
3. Gulfport Energy
1. Grupo Galicia
(
GGAL
)
Banks have been out of favor. Grupo Galicia is the holding
company for Banco Galicia, one of Argentina's oldest banks. It
provides financial services to corporations and individuals
throughout Argentina. It also is a big supplier of credit
cards.
- PEG Ratio: 0.1
- Industry: 1.4
- 2012 Expected Earnings Growth: 2.4%
Grupo Galicia has a high return on equity (ROE) of 36%, which is
an important fundamental for a bank. Its peers average just
24.5%.
Additionally, shareholders get a small dividend, yielding 0.3%.
Grupo Galicia is a Zacks #3 Rank (Hold).
2. Seagate Technology
(
STX
)
Seagate manufactures hard disc drives worldwide. There have been
concerns about the hard drive industry since the floods in Thailand
last year hit global production. Seagate is super cheap with a
forward P/E of just 4.3.
- PEG Ratio: 0.2
- Industry: 0.2
- Fiscal 2012 Expected Earnings Growth: 405.4%
Seagate is expected to have record fiscal 2012 and 2013 results.
It is a Zacks #1 Rank (Strong Buy).
3. Gulfport Energy
(
GPOR
)
Gulfport Energy is an oil and natural gas explorer and producer
with operations along the Louisiana Gulf Coast, in the Permian
Basin and Utica Shale. The company also has an interest in the
Alberta Oil Sands. The energy stocks have been overlooked by
investors over the past few months. Gulfport has a forward P/E of
just 11.8.
- PEG Ratio: 0.2
- Industry: 9.8
- 2012 Expected Earnings Growth: 23.1%
Gulfport is a Zacks #3 Rank (Hold) stock.
Low PEG Ratios Are the Beginning Not the End
Seeking a low PEG ratio is a good way to begin a search for
value stocks but it's not the only indicator. As outlined here,
start with the PEG ratio and also screen for other fundamentals.
Combined with other value indicators, the PEG ratio can be a
powerful tool for value investors.
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GRUPO GALIC ADR (
GGAL
): Free Stock Analysis Report
GULFPORT ENGY (
GPOR
): Free Stock Analysis Report
SEAGATE TECH (
STX
): Free Stock Analysis Report
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