With these articles, I want to highlight all the companies that, according to GuruFocus, have a predictable business and are undervalued according to the Price/DCF (Average). I also apply another filter to those results to give you just the companies that have a significant EPS growth rate.
When a company is undervalued but earnings are growing, we can believe that sooner or later Mr. Market will take care of the price.
Grupo Financiero Galicia SA (GGAL)
The Company's subsidiary Banco Galicia operates in Argentina and substantially all of its customers, operations and assets are located in Argentina. Banco Galicia is a bank that provides, directly or through its subsidiaries, a wide variety of financial products and services to large corporations, small and medium-sized companies, and individuals.
The stock has a business predictability of 4.5/5 Stars and is currently trading at 10.00 of P/E +118.10% from its 52 weeks low and -13.78% from its 52 weeks high (that was reached on March 2015). Over the past 12 months, the price rose by 79%.
The Peter Lynch earnings line gives a fair value of $44.90 with a margin of safety of 52%; the DCF model gives a fair value of $44.93 that put the stock as undervalued and with a margin of safety of 50% at current prices.
During the last 5 years, EPS grew by 64.90% (42.80% over the last 12 months), revenue grew by 32.20% and EBITDA by 44%
Profitability & Growth is rated 8/10 and returns are ranked higher than 84% of other companies in the Global Banks – Regional – Latin America industry. A ROE of 36.84%, a ROA of 3.39% and a ROC of 145.87% are a good proof about the ability of the company to make money year over year, and these ratios are above the company’s median of the last 10 years.
GGAL pays an easy Yield of 0.16% to its shareholders, with a growth rate of 14.50% over the last 3 Years.
George Soros is the only guru holding GGAL with 186,474 shares (0.14% of shares outstanding, or 0.05% of total assets of its portfolio.
Alliance Resource Partners LPÂ (ARLP)
The Company is a diversified producer and marketer of coal to United States utilities and industrial users. It operates ten underground mining complexes in Illinois, Indiana, Kentucky, Maryland and West Virginia.
The stock has a business predictability of 5 out of 5 and is currently trading at 7.00 of P/E (near its all time low of 6.04) +3.60% from its 52-Week Low and -40.10% from its 52-week high. Over the past 12 months, the price dropped by 31%.
The Peter Lynch earnings line gives a fair value of $71 with a margin of safety of 55%; the DCF model gives a fair value of $80.21 that put the stock as undervalued and with a margin of safety of 60% at current prices.
During the last 5 years, EPS grew by 15.20% (12.40% over the last 10 years and 22.70% over the last 12 months), revenue grew by 12.40% and EBITDA by 16.00%. Over the last 12 months all rates are growing (revenue, EBITDA, free cash flow and book value: by 5.20%, 14.40%, 49.10% and 16.40%).
Profitability & Growth is rated 7/10 and returns are ranked higher than 99% of other companies in the Global Coal industry (ROE of 49.89%, ROA of 22.05%, ROC of 30.76%).
ARLP pays a strong, growing and continuous Yield of 7.97% to its shareholders, with a 54% of payout ratio. The yield is increasing since 2002, at a rate of 11.40% over the last 5 years and 14.30% over the last 10 years.
Jim Simons is the main Guru of ARLP. It holds 271,246 shares (0.37% of shares outstanding) or 0.02% of his total portfolio.
Bank Bradesco (BBD)
The Company is a full-service financial institution providing, directly or through its subsidiaries various banking, financial, purchasing consortium management, asset management, insurance, investment banking, pension plan (or pension) and capitalization bond services for all segments of the Brazilian market.
The stock has a business predictability of 4.5/5 stars and is currently trading at 6.20 of P/E +20.00% from its 52-Week Low and -34.95% from its 52-week high. Over the past 12 months, the price dropped by -21%.
The Peter Lynch earnings line says the company is fairly valued; the DCF model, gives a fair value of $31.67 that put the stock as undervalued and with a margin of safety of 68% at current prices.
Profitability & Growth is rated 7/10 and returns are ranked higher than 94% of other companies in the Global Banks – Regional – Latin America industry. Returns are positive (ROA of 1.64%, ROE of 20.02%, ROC of 387.30%) and the business is growing steadily over the past 10 years (revenue +12.70%, EBITDA +18.40%, EPS +11.00%); these growth rates are confirmed during the last 5 years. Over the last 12 months there is something to pay attention to; some rates are growing much faster than last years and some others are doing the same but on the opposite way: revenue is dropping by 40%, EPS by 20% and free cash flow by 53%, while EBITDA is growing by 98% and book value by 15%.
BBD pays an easy yield of 0.80% to its shareholders, with a 12% of payout ratio. The yield is increasing since 2013, at a rate of 28.50% over the last 5 years and 88.50% over the last 3 years.
Jim Simons is the main Guru of BBD. It holds 2,849,343 shares (0.06% of shares outstanding) or 0.06% of his total portfolio. He started this holding on 2015 Q1.
Related Articles : Predictable and Undervalued : Part I
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Conclusions
All the above mentioned companies are giving good returns, are almost out of debts and, most important, are growing.
All of them are largely undervalued but my preference this time goes to ARLP. The company more than good returns and growing annual rates, has a very interesting dividend yield and is worth to have it on my portfolio. Anyway is not yet time to buy, since the current downward trend is lasting since 8 months and there are no signals that it will end soon. Let’s just follow it day by day and wait for a good and strong signal for a good upward trend.
I don't hold any of the above mentioned companies, what about you? Do you have one, two or even all of them in your portfolio? Are they on your watch list?
