It's always hard to invest in a stock that's at or above its 52-week high. For all the strong valuations one might find, the sense that it's a rocket that's already taken off can make it difficult to swallow jumping on board.
What's more, most stocks reaching a 52-week high are often due to either level off or decline. However, when a company is strong enough, investors shouldn't let the fact that it would have been a much better deal a few weeks or months earlier kill a chance for a good investment.
So, here are five strong companies that show a variety of solid valuations, with low PEG, P/FCF, P/E, and high operating margins while also falling within 10 percent of their 52-week high. While it's entirely possible that these companies won't be able to break into new territory, there are real reasons to believe that they can buck the trend.
Apple rode its most recent earnings statement to a new 52-week high and recently pushed past Exxon (XOM) to be the highest valued company in the world with a market cap of over $422 billion (Exxon fell over 2 percent today to land just under $410 billion). But despite the sky-high share price of over $455 a pop, Apple could still be undervalued based on its valuations. It's P/E is under 13, it's PEG is about 0.7, its forward P/E is under 10, and its P/FCF is just over 11. All of this would seem to indicate the the tech giant is still making enough money and projecting enough growth that share prices could be expected to continue growing. Apple also has an operating margin of just under 34 percent, and all this with the iPhone 5 still waiting in the wings. Can the biggest keep getting bigger?
Gilead Sciences (GILD)
Gilead made waves when it paid a 90 percent premium to acquire hepatitis C drug maker Pharmasset (VRUS) for $11 billion. However, despite the steep price, Gilead appears to be doing something right. The company has been has been on a tear since mid-December of last year, rising over 30 percent since Dec. 17. All this has put Gilead less than half a percent under its 52-week high, leaving some to wonder if it can keep going. However, Gilead's strong valuations would seem to indicate it can. Based on its earnings, growth projections, and free cash flow, the price for Gilead isn't too high at all at the moment.
Ebix supplies software and e-commerce solutions to the insurance industry, a business that has apparently been on the upswing of late. Ebix has seen its share price climb almost 60 percent since the start of November last year, putting it just over 1.3 percent under its 52-week high. However, Ebix currently has a gross margin of just under 80 percent, an operating margin over 40 percent, and a profit margin approaching 45 percent. Throw in a P/E under 15, a PEG under 1, and a P/FCF just under 13.5 and the stock could still look pretty appealing despite its potential for peaking out.
Discover Financial Services (DFS)
We know, nobody takes Discover. But people have been buying Discover lately, shares are up over 30 percent in the last year. It might be difficult to shell out more than $27 a share when one considers that, at this time last year, the stock was just over $20 a share, but there's ample reason to believe that's still a great price. Discover's got a tiny P/FCF of just over 4.25, a PEG just under 0.75, and a P/E of just under 6.75.
CF Industries Holdings (CF)
CF Industries is a manufacturer of nitrogen and phosphate fertilizer products, and it appears to be doing a fairly solid job based on its share price, which is up over 30 percent in the last year. CF went through a number of peaks and valleys, rising high in late summer before swooning hard in early October, but the stock has since bounced back to pull within 7.65 percent of its 52-week high. Despite this, CF could still have potential. Its operating margin exceeds 40 percent, while its PEG of 0.66 and P/E of under 10 are also appealing.
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