Companies across all industries and sectors– whether large, medium or small cap — can fall out of favor with investors. Large scale sells will drive prices down, leaving some stocks undervalued. Investors can earn substantial gains by buying, holding and eventually selling these stocks once they reach their fair values. With the use of fundamental analysis, investors can find these hidden treasures and increase their own wealth. Below are 5 undervalued companies. Using the discounted free cash flow valuation metric, I have assigned a fair value to each. Investors should buy these companies at their current low price and sell them once prices reach their fair value.
Thermo Fisher Scientific, Inc (TMO): Fair Value – $65. Shares of Thermo are currently trading between $49 and $50, down 24% from their 52 week high of $65. Despite modest growth rates in 2010, the company managed to increase profits by 20%. Sales in the first three quarters of 2011 have grown 13% from the same period in 2010. Thermo shares are priced relatively cheap to the company’s competitors. The stock has a P/E multiple of 14, whereas the industry is currently trading at a multiple 17. The Price to Sales Ratio of 1.63, compared to the industry average of 2.03, reaffirms the company is undervalued, providing a profitable opportunity.
Transocean Ltd (RIG): Fair Value – $65. In recent weeks shares have traded at major discounts in contrast to their fair value.The company currently trades just above $40 a share, down 54% from its 52 week high. To continue reading, click here.
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