3 Undervalued Growth Stocks To Watch In 2014
James Dennin, Kapitall: High stock market valuations are making it difficult to find undervalued growth stocks. Are there any out there?
Price dispersion in the stock market is at its lowest levels in years, making it even harder to find value stocks – much less value stocks with growth potential.
[Read more from Kapitall: Value Investing: 5 Most Profitable Stocks in the Warren Buffett Portfolio]
Improving economic sentiment in Washington has led to five straight days of declines on Wall St. Concerns include quantitative easing and whether this policy has inflated the value of the stock market, and made it vulnerable to bubbles.
But don't worry, Kapitall Wire's got your back. We decided to re-run our screen from last year, which looks for potentially undervalued growth stocks.
To do that we began by screening for stocks that appear to be undervalued relative to earnings growth, with a price to earnings growth (PEG) ratio below one, and a price to free cash flow ratio (P/FCF) below 15.
Next we looked at the Graham Number – which considers earnings, profit margins, share price, and book value per share to derive a fair value for the stock. We only included stocks that have at least a 15% upside toward this number.
Finally, we then screened for those stocks with high-growth potential, measured by five-year projected EPS growth rates above 15%.
Current prices suggest that the stocks remaining on our list are trading at a discount to fair value, and will potentially gain in the long-run if the economy grows.
Click on the interactive chart below to view returns over time.
Do you see investing opportunities among these undervalued growth stocks? Use the list below to begin your own analysis.
1. Hardinge Inc. (HDNG): Engages in the design, manufacture, and distribution of machine tools. Market cap at $173.12M, most recent closing price at $14.77.