It certainly is exciting that the market made all time new highs on Friday. However, from these historic heights it is ever harder to find stocks with impressive upside potential. Especially those companies that are not just cheap, but actually have healthy earnings outlooks. So my weekend research project was to dig a bit deeper to find those rare few stocks that still had exceptional upside potential. Like 50% to 94% upside to fair value, while also flexing their muscle on operational strength. My research project 12 companies that make the grade.
The most recognizable name on this list is the Japanese banking giant, Sumitomo Mitsui (SMFG). Even though this company sports a $50 billion market cap, it is not widely followed by Wall Street analysts. However, those who are paying attention see 60% upside in the share price in the year ahead. Also interesting to note that Foreign Bank group is A rated for the POWR Industry Rank.
Another hidden gem is Gold Resources (GORO) which is a gold mining company centered in Mexico. Interestingly, they don’t just hang their hat on gold because they also have reserves in silver, zinc and copper which helps diversify their earnings stream beyond the gold boom and bust cycles.
GORO has definitely enjoyed some serious momentum of late thanks to gold taking a run over $1,500. This has led to an impressive 15% gain this past month and +47% the past three months. But what matters is the outlook for GORO going forward. There we see Wall Street analysts still expecting 64% more upside from current elevated levels…a case of buy high, sell higher.
Now let’s open my kimono to have a few of the full research process employed to find these undervalued gems:
- 8,000+ US based stocks to start with.
- 1,978 with POWR Rating of A or B. As you probably know by now, this is our exclusive rating system that is built on top of 4 different scores of a stocks attractiveness. Everything from long term to short term view. Plus Industry Rank and how well it stacks up inside its industry. When rolled together it points to stocks experiencing the most healthy momentum at this time and thus likely to stay on the rise.
- 591 stocks that had earnings estimates not heading lower for this year and next. You can see how this important growth health check knocked out 70% of the stocks. Just think about it this way, a company whose earnings outlook is going down is likely managed poorly and likely to miss earnings again in the future. That is what creates a value trap (a cheap looking stock that only heads lower and lower). This vital criteria puts us into stocks whose outlooks remains healthy and more likely to attain their fair value targets.
- 12 Stocks with 50% or more upside to fair value targets set by Wall Street analysts. And yes, Wall Street target prices are the best universal choice of value metric. That is because different industries have different methods of valuation and just using PE, PEG, Price to Sales, Book Value, Discount Cash Flow or other valuation metrics across all industries will have you missing many attractive opportunities.
When you add it altogether we are talking about 12 stocks that blend healthy earnings growth + momentum + extreme value. Check them out below.
|Company||Ticker||Market Cap ($mil)||Price||Target||Upside|
|Azure Power Global||AZRE||$544||$13.27||$22.33||68.27%|
|North Amer Construction||NOA||$308||$11.20||$18.15||62.05%|
Want more great stock picks? Then check out these additional resources:
SMFG shares closed at $7.30 on Friday, up $0.03 (+0.41%). Year-to-date, SMFG has gained 12.14%, versus a 26.50% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|SMFG||Get Rating||Get Rating||Get Rating|
|AROC||Get Rating||Get Rating||Get Rating|
|CGEN||Get Rating||Get Rating||Get Rating|
|GORO||Get Rating||Get Rating||Get Rating|
|STRL||Get Rating||Get Rating||Get Rating|