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These 3 Stocks Have Low Price-to-Free-Cash-Flow Ratios

- By Alberto Abaterusso

The price-free cash flow metric is one of the most used by value investors, the lower the better, of course. A low value may indicate the stock is underestimated and the odds that investors are getting a bargain is high.

I screened for stocks with a low price-free cash flow value and uncovered the following three companies.

Genworth Financial Inc. (GNW) is trading at $4.57 per share on the New York Stock Exchange and has a market capitalization of $2.29 billion. For the 52-weeks through Aug. 16, the stock has climbed 32% and is now trading above the 200, 100 and 50-SMA lines. The share price is nearly 72% above the 52-week low of $2.66 and only 7.7% off the 52-week high of $4.92.


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Genworth Financial stock is not trading cheaply. A low price-to-free-cash-flow ratio is explained by 16.3% growth in the free cash flow of the company over the last five fiscal years. The growth rate is a yearly average.

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The price-book ratio is 0.17 versus an industry median of 1.25, and the price-sales ratio is 0.28 versus an industry median of 1.04.

GuruFocus assigned a low rating for financial strength and profitability & growth. The financial strength rating is 3 out of 10 and the profitability & growth rating is 1 out of 10.

The U.S. financial services company is headquartered in Richmond, Virginia, and provides its global clients with insurance and homeownership solutions. It conducts its business through the following five segments: U.S. Mortgage Insurance, Canada Mortgage Insurance, Australia Mortgage Insurance, U.S. Life Insurance and Runoff.

The company is reporting 500.68 million shares outstanding, of which 67.76% is held by institutions and 0.66% is held by insiders.

During the second quarter of 2018, Ken Fisher (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) opened positions in the company. Ken Fisher (Trades, Portfolio) held 15,000 shares and Mario Gabelli (Trades, Portfolio) held 13,400 shares.

Chuck Royce increased his holding by 5.21% to 9,902 shares.

Joel Greenblatt (Trades, Portfolio) and Richard Pzena (Trades, Portfolio) sold out.

Deutsche Bank Aktiengesellschaft (DB) traded at $11.21 per share on the New York Stock Exchange Friday and has a market capitalization of $23.7 billion. The share price is below the 200, 100 and 50-SMA lines. It is also 36.5% below the middle of the 52-week range of $10.36 to $20.23.

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The price-to-free-cash-flow ratio is 0.52.

The annual growth of the free cash flow has been on average null over the last five years.

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Other ratios show that the price-book ratio is 0.3 versus an industry median of 1.24 and the price-sales ratio is 0.81 versus an industry median of 3.41.

Deutsche Bank has a financial strength rating of 4 out of 5 and a profitability & growth rating of 1 out of 10. GuruFocus has also detected one warning sign for Deutsche Bank.

The stock is reporting 2.06 billion shares outstanding, of which 27.41% is held by institutions.

During the second quarter of 2018, Pioneer Investments and Third Avenue Management reduced their positions. Pioneer Investments owned 20,940,596 shares and Third Avenue Management held 322,000 shares.

The third stock is Brighthouse Financial Inc. (BHF). The stock was trading at $41.76 per share on the Nasdaq Friday, and the market capitalization was $5 billion. The share price was below the 100, 200 and 50-SMA lines. The 52-week range is $39.24 to $67.55 per share. The stock has fallen 27% for the 52-weeks through Aug. 16.

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Brighthouse Financial has price-book ratio of 0.37 versus an industry median of 1.18 and a price-sales ratio of 0.66 versus an industry median of 0.82.

The share price has declined along with the free cash flow.

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However, the price-free cash flow is 1.64, below the industry median of 6.33.

GuruFocus has assigned a financial strength rating of 4 out of 10 and a profitability & growth rating of 3 out of 10. GuruFocus detected one warning sign for Brighthouse Financial.

Brighthouse Financial Inc. provides its U.S. clients with a range of annuity and life insurance products.

The company reports 119.78 million shares outstanding, of which 70.46% is held by institutions.

During the second quarter of 2018, Diamond Hill Capital increased its holding by 65.45% to 6,094,350 shares.

David Einhorn added 4.89% to his position to 11,580,000 shares.

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

This article first appeared on GuruFocus.