When searching for opportunities among growing companies, investors could be interested in the following stocks, since their share prices are trading near or below their Peter Lynch fair values.
This metric, which is based on the idea that the fair price-earnings ratio for a growing company is on par with its growth rate, is derived from the combination of the following components:
- The stock's price-earnings to growth ratio.
- The stock's five-year Ebitda growth rate.
- The stock's earnings per share without non-recurring items for the trailing 12 months through the most recent quarter.
Vale SA
The first stock that meets the criteria is Vale SA (VALE, Financial), a Brazilian producer and seller of various mining products such as iron, nickel and coal.
On Tuesday, Vale SA’s shares closed at $19.95, below its Peter Lynch fair value of $28.70, for a price-to-Peter-Lynch-fair-value ratio of about 0.70. This ranks better than 96% of the 101 companies that operate in the metals and mining industry.
The stock has a market capitalization of $96.63 billion after the share price has increased by 15.54% over the past year. The 52-week range is $11.16 to $23.17.
The stock has a median recommendation rating of overweight on Wall Street. The average target price is $20.76 per share.
Dell Technologies Inc.
The second stock that makes the cut is Dell Technologies Inc. (DELL, Financial), a Round Rock, Texas-based developer and manufacturer of IT hardware, software and high technology solutions.
On Tuesday, Dell Technologies Inc.’s stock closed at $55.03, which is well below the Peter Lynch fair value per share of $175.25, yielding a price-to-Peter-Lynch-fair-value ratio of approximately 0.31. This ranks better than 93% of the 637 companies that operate in the hardware industry.
The stock has a market capitalization of $41.31 billion following a 22.05% increase that occurred over the past year. The 52-week range is $44.57 to $61.54.
The stock has a median recommendation rating of overweight on Wall Street and an average target price of $64.85 per share.
Cleveland-Cliffs Inc.
The third stock that qualifies is Cleveland-Cliffs Inc. (CLF, Financial), a Cleveland, Ohio-based iron ore miner and flat-rolled steel producer.
On Tuesday, Cleveland-Cliffs Inc.’s shares closed at $31.97, below its Peter Lynch fair value per share of $98.16, for a price-to-Peter-Lynch-fair-value ratio of about 0.33. This ranks higher than 70% of the 164 companies that operate in the steel industry.
The stock has a market capitalization of $16.84 million following a 59.67% increase over the past year. The 52-week range is $15.81 to $33.34.
The stock has a median recommendation rating of overweight with an average target price of $32.05 per share on Wall Street.
