3 Undervalued Stocks Primed to Climb

Brittney Barrett |

Undervalued stocks can be a gold mine for investors should they play their cards right, but it’s important to pay close attention before jumping head first on an attractive P/E ratio. Below we’ve identified 4 stocks that appear to be on a positive trajectory thus far gone unnoticed by the talking heads on Wall Street.

DIRECTV (NASDAQ: DTV)

A provider of digital television in the U.S. and Latin America in, DIRECTV, is coming off an impressive first quarter. The company, which has ramped up its campaign for customers in Latin America recently added 427,000  new subscribers from the region in the quarter.  Stateside, they tacked on 184,000 new customers, an increase in additions of 84 percent from the previous quarter. Their efforts for the most part; however, have not been reflected in their share prices. The company continues to trade well-beneath analyst estimates in spite of an earnings report showing revenues up 13 percent to $6.32 Billion. DTV has a median price target of $66 by 16 brokers and a high target of $74, but has been unable to escape the $50 price range in the last 52-weeks.  Annually, DTV’s net income reached $674 million or 85 cents per share a significant improvement from last year’s $558 million, or 60 cents per share.

 

DIRECTV U.S. Operating Profit before depreciation and amortization was 12 percent higher to $1.77 billion while operating profit tacked on 21 percent to $1.16 billion compared to the same quarter a year earlier. The company has a P/E ration of 18.1 according to Forbes, and has the 3rd highest Return on Equity in this segment of the market. According to China Analyst, its ROE was 228.09 percent for the last year alongside a net profit margin of 9.75 percent.

 

Smith Micro Software Inc. (NASDAQ: SMSI)

Smith Micro Inc, a designer and developer of  markets software products and services for the mobile computing and communications industries, has been going through a rough patch. The company is currently trading at 31 percent of its 52-week high after missing earnings expectations last quarter. Smith Micro; however, has strong fundamentals that could lead to improved future earnings and higher share prices. The company, which is dually focused on developing connectivity, communications, and content management solutions for wireless and wired network, announced the launch an update of its secure, cloud-based enterprise file transfer service, the SendStuffNow solution last week. The product is designed to serve the needs of businesses who are sending increasingly larger files.

Beyond their latest development, Smith Micro’s balance sheet looks to be in excellent shape with cash exceeding total liabilities. Furthermore, they have a history of delivering positive free cash flow, performing 8 of the past 10 years.

According to VURU, they have a Growth Price (DCF) of $9.39 against a current price: $5.19 and SMSI is undervalued by 82.69%

Teva (NASDAQ: TEVA)

The world’s largest generic drug maker, Israel’s Teva Pharmaceutical Industries Ltd., is currently trading only 9.36 percent above their 52 week low, despite significant growth and acquisition activity. Net income for the company increased by 6.73 percent last quarter, while operating cash flow grew by 8.98 percent year over year. Perhaps its Teva’s lofty goals, and the risk acquisitions they’re making to achieve them ahead of their own schedule that is discouraging investors and prompting the stock’s continued struggle.

Yesterday, the company announced plans to pay $460 million for a majority stake in Japanese generics powerhouse Taiyo Pharmaceutical Industry Co. which it believes will boost annual sales in Japan to $1 billion in the next few years. Granted, the size of the acquisition implies a degree of risk, as did August’s decision to purchase Provigil drug-maker Cephalon Inc. for $6.8 billion. Certainly these will affect earnings immediately, but long term, it could help boost sales in a major way.

Right now, the company has a P/E ratio of 10.9, beneath those of competing companies in the industry which average around 13.3.

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
ARR.PRA ARMOUR Residential REIT n/a n/a n/a 0
TEVA Teva Pharmaceutical Industries Limited American De 35.03 -2.01 -5.43 30,841,689

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