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3 Stocks That Could Represent Bargain Opportunities

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GuruFocus.com
·4 min read
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- By Alberto Abaterusso

Below are three stocks that have underperformed the broader market recently. They are also in considerable financial distress, as represented by poor Altman Z-Scores, which indicate a possibility for bankruptcy within two years.

Nonetheless, their operating activities are profitable, as indicated by GuruFocus profitability ratings of at least 6 out of 10. They also hold positive recommendation ratings on Wall Street. Thus, sell-side analysts seem to think these companies possess the potential to improve their conditions, though investors should keep an eye out in case things start to get worse.


PetroChina Co Ltd

The first stock that meets the criteria is PetroChina Co Ltd (NYSE:PTR), a Chinese oil and gas corporation.

The stock has an Altman Z-Score of 1.65, which indicates financial distress. The interest coverage ratio of 3.51, however, indicates that the company can continue paying its interest expenses for the short-term.

GuruFocus has assigned a rating of 6 out of 10 to the company's profitability, driven by three-year EPS without NRI growth rate of 84.2% (versus the industry median of 7.7%).

The share price ($35.76 as of Feb. 26) has suffered a steep declined of nearly 11% over the past year, as you can see in the below chart.

3 Stocks That Could Represent Bargain Opportunities
3 Stocks That Could Represent Bargain Opportunities

Two analysts on Wall Street forecast that the share price will rebound strongly within a year, as they have issued buy recommendation ratings and an average price target of $48.07 per share for a 34.4% upside.

The market capitalization is $65.45 billion, the 52-week range is $27.68 to $41.20 and the forward dividend yield is 7.07% (if the dividend is not cut).

Enbridge Inc

The second stock that makes the cut is Enbridge Inc (NYSE:ENB), a Calgary, Canada-based oil and gas infrastructure operator.

The stock has an Altman Z-Score of 0.8, indicating severe financial distress. The interest coverage ratio of 2.8 indicates that the company can barely continue paying its interest expenses for the time being.

GuruFocus has assigned a rating of 6 out of 10 for the company's profitability, driven by an operating margin of 20.36% (versus the industry median of -0.13%) and a net margin of 8.6% (versus the industry median of -7.47%).

The share price ($33.81 as of Feb. 26) has marked a sharp decline of 11.49% over the past year, as you can see in the below chart.

3 Stocks That Could Represent Bargain Opportunities
3 Stocks That Could Represent Bargain Opportunities

Wall Street sell-side analysts forecast that the share price will bounce back strongly within 52 weeks, rising up to the $41.66 average target price, which reflects a 23.2% upside from Friday's closing price of $33.81. These analysts have issued one strong buy, five buys and six hold recommendation ratings for the stock.

The market capitalization is $69.03 billion, the 52-week range is $22.57 to $38.97 and the forward dividend yield is 7.78% (assuming the dividend is not cut).

TC Energy Corp

The third stock that makes the cut is TC Energy Corp (NYSE:TRP), a Calgary, Canada-based natural and liquified natural gas and oil midstream operator with activities in North America.

The stock has an Altman Z-Score of 0.8, indicating severe financial distress. The interest coverage ratio of 2.84 indicates that the company can barely continue paying its interest expenses for the time being.

GuruFocus has assigned the company a profitability rating of 7 out of 10, driven by an operating margin of 53.3% (versus the industry median of -0.13%) and a net margin of 39.71% (versus the industry median of -7.47%).

The share price ($41.93 as of Feb. 26) has by 21.24% overe the past year, as the below chart exhibits.

3 Stocks That Could Represent Bargain Opportunities
3 Stocks That Could Represent Bargain Opportunities

Wall Street predicts a strong rebound in the share price up to a $54.51 average target price, which mirrors a 30% upside from Friday's closing price. Analysts have issued three strong buys, three buys and two hold recommendation ratings for the stock.

The market capitalization is $39.73 billion, the 52-week range is $32.37 to $55.25 and the forward dividend yield is 6.53% (assuming the dividend is not cut).

Disclosure: I have no positions in any security mentioned in this article.

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This article first appeared on GuruFocus.