The hunt for value takes us to many different corners of the market. While depth in value is nice, we may also find great opportunities in stocks that are likely to grow their intrinsic value rapidly in the future, and the market today is not adequately appreciative. While this sounds very much like a GARP screen, please note that these stocks will show up on a pure value screen as well - we just added an additional growth filter.
This screen focuses on undervaluation but also demands a history of EPS growth. It is unlikely that these conditions will yield deeply undervalued names, but it can identify ideas where not only the current market price may be below the value of the company, but there may also be significant value growth in the future.
The following general screen parameters were employed:
- Market capitalization = $30 m - $920 m
- P/E Ratio = 0 - 15
- P/B Ratio = 0 - 1
- EPS Growth = 11.99% and above
Learn about the important financial ratios here
The Screen Results
The screen was run on Jun 10, 2019 intra-day using the Fidelity screener. As you review these stocks, please ensure that your numbers agree with this screen. The screen yielded about 29 stocks.
We are grouping these stocks by sector to help you choose which stocks to research first based on your individual industry/sector exposure and allocation requirements. Here we look at the Consumer Staples and Consumer Discretionary sectors. I will post other sectors in the coming days.
There are brief notes for each stock to help guide your research. Over time I will post reviews of some of these stocks on the VSG website as well. Feel free to comment below and let me know if there is a stock you want me to review first.
Sector: Consumer Staples, Consumer Discretionary
P/e (Last Year Actual)
Price to book ratio
eps growth (5 yr hist)
Century Communities Inc
J Jill Inc
Party City Holdco Inc
Notes and Observations
- CCS: Century Communities Inc is a homebuilder several southern and southwestern US states. Over the last 4 years, the company has steadily grown its revenue, earnings and shareholder's equity. The stock is available at a great valuation, however with the real estate markets heating up in many parts of the country, you need to consider if the valuation provides you with enough margin of safety
- CPS: Fairly steady P&L and Balance Sheet over the years, the auto part manufacturer is nicely valued. No doubt the investor sentiment in traditional automotive sector is not very enthusiastic. This may make this stock a good investment, unless you believe that electric cars will make traditional autos obsolete very soon.
- JILL: Retail is under distress and the valuation of J Jill reflects the pessimism about mall based apparel stores. Of concern is its current ratio below 1, that may show a liquidity squeeze. I will like to investigate this deeper and I am adding this to my watch list.
- PRTY: The 111% EPS growth may be an aberration but the company seems robust and the price may be attractive. I am aware of the helium shortage issues. There is a significant amount of short interest in the name. I have had good success in the past going against the shorts, but of course, this calls for deeper due diligence and enough conviction. I am adding this to my watch list as well.
- SPTN: Solid company and I do not have much business concerns at this time. The valuation seems close to being fair. They do pay a 6.59% dividend yield, but at 90% payout ratio, I would worry about the stability of the dividend. I will pass for now.
The 2 stocks I am interested in reviewing further are JILL and PRTY. In both cases, there are good reasons why the stock is distressed.
If you find one of the other stocks interesting, let me know and I will investigate.