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A Trio of Low Price-to-Free-Cash-Flow Ratio Stocks

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·4 min read
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- By Alberto Abaterusso

When screening the market for value opportunities, one method is to pick securities whose trailing 12-month price-to-free-cash-flow ratios are low compared to that of the S&P 500 index, which stands at 15.35 as of the writing of this article. In my view, these securities could be trading at compelling prices.

Thus, investors may want to consider the following three stocks, as they meet the above criteria and are recommended by sell-side analysts on Wall Street.


Westpac Banking Corp

The first stock to consider is Westpac Banking Corp (NYSE:WBK), an Australian global bank.

Westpac Banking Corp's price-to-free-cash-flow ratio is 1.62 as of Feb. 22, ranking higher than 79% of 1,053 companies that operate in the banks industry.

Westpac Banking Corp's free cash flow per share for the trailing twelve months ended in September 2020 stood at $11.55. It grew by 906.80% over the past year.

As a result of a nearly 14% increase that took place over the past year, the stock price traded at $18.70 per share at close on Monday for a market capitalization of $67.51 billion and a 52-week range of $7.98 to $18.90.

A Trio of Low Price-to-Free-Cash-Flow Ratio Stocks
A Trio of Low Price-to-Free-Cash-Flow Ratio Stocks

Currently, Westpac Banking Corp is paying semi-annual dividends to its shareholders, with the most recent distribution, 23.5 cents per common share, made on Dec. 28, 2020. The payment produces a trailing twelve-month dividend yield of 1.26% as of Feb. 22.

GuruFocus assigned a score of 2 out of 10 to the company's financial strength rating and of 4 out of 10 to its profitability rating.

Wall Street recommends an overweight recommendation rating with a target price of $19.65 per share for the stock.

Herbalife Nutrition Ltd

The second stock investors may want to consider is Herbalife Nutrition Ltd (NYSE:HLF), a Los Angeles, California-based provider of nutrition solutions in North America and internationally.

Herbalife Nutrition Ltd's price-to-free-cash-flow ratio is 11.92 as of Feb. 22, ranking higher than 64% of 1,022 companies that operate in the consumer packaged goods industry.

Herbalife Nutrition Ltd.'s free cash flow per share for the trailing twelve months ended in December 2020 stood at $3.80. The free cash flow increased by 8.4% per year over the past 10 years, by 9.1% per year over the past five years and by 54.8% over the past year.

As a result of a nearly 25% increase that happened over the past year, the stock price traded at $45.28 per share at close on Monday for a market capitalization of $5.34 billion and a 52-week range of $20.73 to $59.

A Trio of Low Price-to-Free-Cash-Flow Ratio Stocks
A Trio of Low Price-to-Free-Cash-Flow Ratio Stocks

Currently, Herbalife Nutrition Ltd does not pay dividends, as it stopped paying them in 2014.

GuruFocus assigned a score of 4 out of 10 to the company's financial strength rating and of 9 out of 10 to its profitability rating.

Wall Street recommends a median rating of buy with an average target price of $69.67 per share for the stock.

Hillenbrand Inc

The third stock to consider is Hillenbrand Inc (NYSE:HI), a Batesville, Indiana-based manufacturer and seller of process and material handling equipment and systems, injection molding and extrusion equipment and several other industrial products serving various industries.

Hillenbrand Inc's price-to-free-cash-flow ratio is 9.34 as of Feb. 22, ranking higher than 75% of 1,584 companies that operate in the industrial products industry.

Hillenbrand Inc's free cash flow per share for the trailing twelve months ended in December 2020 was $4.89. The free cash flow increased by 7.8% per year over the past 10 years, by 17.3% per year over the past five years and by 134.20% over the past year.

Following a more than 70% increase over the past year, the stock price was trading at $45.68 per share at close on Monday for a market capitalization of $3.43 billion and a 52-week range of $13.61 to $46.96.

A Trio of Low Price-to-Free-Cash-Flow Ratio Stocks
A Trio of Low Price-to-Free-Cash-Flow Ratio Stocks

Currently, Hillenbrand Inc is paying a quarterly cash dividend of 21.5 cents per common share to its shareholders. The next payment is scheduled to be issued on March 31, which generates a forward dividend yield of 1.88% as of Feb. 22.

GuruFocus assigned a score of 4 out of 10 to the company's financial strength rating and of 7 out of 10 to its profitability rating.

Wall Street recommends a median rating of buy with an average target price of $53.75 per share for the stock.

Disclosure: I have no position in any security mentioned.

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This article first appeared on GuruFocus.