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A Trio of Stocks Trading at a Discount

– By Alberto Abaterusso
If you want to have more chances to uncover bargains, one way to do so is to screen the market for equities that are trading at a discount to their intrinsic value estimate as calculated from the projected free cash flow valuati…

- By Alberto Abaterusso If you want to have more chances to uncover bargains, one way to do so is to screen the market for equities that are trading at a discount to their intrinsic value estimate as calculated from the projected free cash flow valuation model. Unlike the discounted cash flow or discounted earnings valuation models, the projected FCF model can be applied to assess the value of companies whose record of revenue and earnings is erratic and may also incorporate losses in some quarters.

The projected FCF uses a normalized free cash flow and book value. The following three stocks appear undervalued according to the projected FCF model. They also hold positive recommendation ratings amid the community of sell-side analysts in Wall Street.

Taylor Morrison Home Corp The first company that qualifies is Taylor Morrison Home Corp (NYSE:TMHC), a Scottsdale, Arizona-based builder of single-family and multi-family homes in the U.S. The stock traded at around £29.34 per share at close on Friday, which represents a discount of 50.7% to the projected free cash flow of £59.52 per share.

The share price has risen by 213.8% over the past year for a market capitalization of £3.78 billion and a 52-week range of £6.39 to £31.11.

A Trio of Stocks Trading at a Discount

A Trio of Stocks Trading at a Discount

GuruFocus has assigned a score of 4 out of 10 for the company's financial strength and of 7 out of 10 for its profitability. As of March, the stock has a median recommendation rating of overweight on Wall Street. Companhia Brasileira De Distribuicao

The second stock that makes the cut is Companhia Brasileira De Distribuicao (NYSE:CBD), a Brazilian operator of a chain of department stores. Here consumers can purchase food, clothing, home appliances, electronics and several other products. The stock traded at around £4.46 per share at close on Friday, which represents a 64.5% discount to the projected free cash flow of £12.55 per share.

Story continues The price has risen 26.43% over the past year, which determined a market capitalization of £1.2 billion and a 52-week range of £3.82 to £17.46.

A Trio of Stocks Trading at a Discount

A Trio of Stocks Trading at a Discount

GuruFocus has assigned a score of 5 out of 10 for the company's financial strength and 7 out of 10 for its profitability. On Wall Street, as of March, the stock has a median recommendation rating of overweight.

Smith & Wesson Brands Inc The third stock that possesses the criteria is Smith & Wesson Brands Inc (NASDAQ:SWBI), a Springfield, Massachusetts-based global manufacturer and seller of firearms. The stock traded at around £18.66 per share at close on Friday, representing a 12.6% discount to the projected free cash flow of £21.35.

The share price has increased by 192.63% over the past year, determining a market capitalization of £993.36 million and a 52-week range of £5.25 to £23.57.

A Trio of Stocks Trading at a Discount

A Trio of Stocks Trading at a Discount

GuruFocus has assigned a score of 8 out of 10 for the company's financial strength and of 7 out of 10 for its profitability. On Wall Street, as of March, the stock has a median recommendation rating of overweight. Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.