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A Trio of Stocks Trading Below the Peter Lynch Fair Value

GuruFocus.com
·4 min read

- By Alberto Abaterusso

Investors seeking opportunities amid growing companies may be interested in the three stocks listed below, as their share prices are standing lower than the Peter Lynch Fair Value.

The Peter Lynch Fair Value, which is based on the idea that the fair price-earnings (PE) value for a growing company matches its growth rate (that is, the price-earnings-to-growth (PEG) ratio equal to 1), is the result of the combination of the following three factors:

  • The stock's PEG ratio.

  • The stock's five-Year Ebitda growth rate.

  • The stock's earnings per share (EPS) without non-recurring items (NRI) for the trailing twelve months (TTM) through the most recent quarter.




Applied Materials Inc

The first stock that makes the cut is Applied Materials Inc (NASDAQ:AMAT), a Santa Clara, California-based supplier of manufacturing equipment, services and software to semiconductor producers.

On Wednesday, Applied Materials Inc's share price closed at $62.11, significantly below its Peter Lynch Fair Value per share of $86 for a price-to-Peter-Lynch-Fair-Value Ratio of about 0.72. This ranks higher than 82% of the 218 companies that are operating in the semiconductors industry.

A Trio of Stocks Trading Below the Peter Lynch Fair Value
A Trio of Stocks Trading Below the Peter Lynch Fair Value

The stock has a market capitalization of $56.24 billion after a 23% increase which happened over the past year. The 52-week range is $36.64 to $69.90.

Also, its price-earnings ratio is 17.91 (versus the industry median of 27.74), the price-book ratio is 5.88 (versus the industry median of 2.17) and the price-sales ratio is 3.5 (versus the industry median of 2.18).

The stock has a GuruFocus financial strength rating of 7 out of 10 and a profitability rating of 9 out of 10.

As of October, the stock has five strong buy recommendation ratings, 15 buy recommendation ratings and only one hold recommendation rating for an average target price of $75.96 per share.

Lennar

The second stock that makes the cut is Lennar Corporation (NYSE:LEN), a Miami, Florida-based homebuilder.

On Wednesday, Lennar Corporation's share price closed at $80.09, substantially below its Peter Lynch Fair Value per share of $89.48 for a price-to-Peter-Lynch-Fair-Value Ratio of about 0.90. This is beating 13 out of 50 companies operating in the homebuilding and construction industry.

A Trio of Stocks Trading Below the Peter Lynch Fair Value
A Trio of Stocks Trading Below the Peter Lynch Fair Value

The stock has a market capitalization of $24.43 billion after a nearly 30% increase which occurred over the past year. The 52-week range is $25.42 to $86.80.

Also, its price-earnings ratio is 11.15 (versus the industry median of 11.46), the price-book ratio is 1.46 (versus the industry median of 1.07) and the price-sales ratio is 1.1 (versus the industry median of 0.75).

The stock has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 8 out of 10.

As of October, the stock has seven strong buy recommendation ratings, six buy recommendation ratings and nine hold recommendation ratings for an average target price of $87.94 per share.

Ameriprise Financial Inc

The third stock that makes the cut is Ameriprise Financial Inc (NYSE:AMP), a Minneapolis, Minnesota-based asset management company that provides various financial products and services to U.S. and international individual and institutional clients.

On Wednesday, Ameriprise Financial Inc share price closed at $166.75, significantly below its Peter Lynch Fair Value per share of $273.51 for a price-to-Peter-Lynch-Fair-Value Ratio of about 0.61. This ranks higher than 67% of the 105 companies that are operating in the asset management industry.

A Trio of Stocks Trading Below the Peter Lynch Fair Value
A Trio of Stocks Trading Below the Peter Lynch Fair Value

The stock has a market capitalization of $20.13 billion after a 16.2% increase which occurred over the past year. The 52-week range is $80.01 to $180.85.

Also, its price-earnings ratio is 8.74 (versus the industry median of 18.19), the price-book ratio is 3.1 (versus the industry median of 0.96) and the price-sales ratio is 1.78 (versus the industry median of 8.74).

The stock has a GuruFocus financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10.

As of October, the stock has three strong buy recommendation ratings, three buy recommendation ratings and five hold recommendation ratings for an average target price of $181 per share.

Disclosure: I have no position in any security mentioned.

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This article first appeared on GuruFocus.