Introduction
Low PEG Ratio stocks can offer good values with reasonable growth prospects. This was one of the favorite metrics used by Peter Lynch of the Fidelity Magellan fund. When applied to the large cap stocks, this is likely to return us names that may be temporarily mis-valued. Although chances of finding great undervalued stocks this way are not very good, the stocks that we do find have other qualities that may make them appropriate for consideration
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Screen Details
This screen looks for large cap stocks above $5 billion in market capitalization with good valuation based on Book Value and Earnings multiples and a low PEG ratio. A PEG ratio under 1 is considered low. Dividends and other attributes are of no consideration in the screening (although you will look at other attributes in your further due diligence):
- PEG ratio, forward < 1
- PEG ratio, trailing < 1
- Price/Book Ratio < 2
- Price/Earnings Ratio < 12
The Screen Results
Stock | Company | PEG Forward | P/B Ratio | P/E Ratio |
|---|---|---|---|---|
ACGL | Arch Capital Group | 0.2 | 1.3 | 9.8 |
GS | Goldman Sachs Group | 0.5 | 1.3 | 9.1 |
JEF | Jeffries Financial Group | 0.5 | 0.9 | 7.6 |
LEN | Lennar | 0.9 | 1.8 | 10.8 |
MKL | Markel | 0.6 | 1.3 | 6.0 |
SBSW | Sibanye Stillwater | - | 0.8 | 1.7 |
TX | Ternium | 0.1 | 1.0 | 5.3 |
Notes and Observations
At this time Lennar appears to be an interesting possibility. The residential real estate market is tight and there appears to be a significant pent up demand for new housing. I will be considering this stock further.