When screening the market for stocks that are trading at reasonable prices, one tool investors can use is the earnings power value (EPV).
The EPV was created by Bruce Greenwald, a former professor at Columbia University and a prominent value investor. Greenwald was in search of ways to bypass the series of guesswork choices that must be made when attempting to appraise the intrinsic value of a stock through the discounted cash flow valuation model. The EPV is calculated as the adjusted earnings divided by the weighted average cost of capital.
The stocks listed below appear reasonably priced as their share prices are trading lower than their respective EPVs.
Donegal Group Inc
The first stock that matches the criteria is Donegal Group Inc (DGICA, Financial), a Marietta, Pennsylvania-based insurance company providing businesses and individuals in the Mid-Atlantic, Midwestern and Southern U.S. states with property and casualty insurance products.
Donegal Group Inc's EPV is $19.75 per share (as of the March 2021 quarter), which is higher than the share price of $15.23 at close on Wednesday for a margin of safety of about 22.89%.
Thanks to a 15.12% share price jump over the past year, the market capitalization is $466.54 million. The 52-week range is $12.99 to $16.48.
GuruFocus has assigned a score of 6 out of 10 to the company's financial strength and 5 out of 10 to its profitability.
Wall Street sell-side analysts issued a median recommendation rating of overweight with an average target price of $18.50 per share for the stock.
Primis Financial Corp
The second stock that holds the criteria is Primis Financial Corp (FRST, Financial), a McLean, Virginia-based regional bank serving US consumers as well as small and mid-tier businesses.
Primis Financial Corp's EPV is $18.13 per share (as of the March 2021 quarter), which is higher than Wednesday's closing share price of $15.50, for a margin of safety of 14.49%.
After a 71.08% increase in the share price that took place over the past year, the market capitalization now stands at $380.22 million. The 52-week range is $8.02 to $16.32.
GuruFocus has assigned a score of 3 out of 10 to the company's financial strength rating and of 5 out of 10 to its profitability rating.
Wall Street sell-side analysts issued a median recommendation rating of overweight for this stock and have set an average target price of $17 per share.
SmartFinancial Inc
The third stock that meets the criteria is SmartFinancial Inc (SMBK, Financial). Based in Knoxville, Tennessee, the regional bank is serving U.S. individual and corporate clients with various financial services which are administered through a network of 35 branches located in East and Middle Tennessee, Alabama and the Florida panhandle.
SmartFinancial Inc's EPV is $39.22 per share (as of the March 2021 quarter), which is standing above the share price of $24.53 at close on Wednesday, for a margin of safety of 37.46%.
Following a 54.86% increase in the share price over the past year, the market capitalization is now approximately $370.52 million. The 52-week range is $12.70 to $24.92.
GuruFocus has assigned a score of 3 out of 10 to the company's financial strength and a score of 5 out of 10 to its profitability.
Wall Street sell-side analysts issued a median recommendation rating of buy for the stock with an average target price of $27.50 per share.
Disclosure: I have no positions in any securities mentioned.
