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TheStreet Open House

7 Rallying Services Stocks Undervalued By The Graham Number

Do you consider yourself a value investor? Consider looking for value in the services sector, which consists of names in electronics wholesale, rental & leasing services, railroads, retail, management services, and airlines. [More Lists:  3 Stocks Reporting Earnings Next Week With Bullish Short Trends]

Companies in our list below have had a positive performance in the last month, and still appear undervalued. Perhaps it's time to invest in the services sector considering the U.S. economy is showing some signs of growth. We created a screen with this in mind.

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We began by screening the services sector for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages, indicating that these stocks have strong upward momentum.

We then screened for those stocks that appear undervalued relative to the Graham Number. The Graham Number is a measure of maximum fair value created by the "godfather of value investing," Benjamin Graham.

It is based on a stock's EPS and book value per share (BVPS).

Graham Number = SQRT(22.5 x TTM EPS x MRQ BVPS)

The equation assumes that P/E should not be higher than 15, and P/BV should not be higher than 1.5. Stocks trading well below their Graham Number may be undervalued.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks. 

More free research tools on Kapitall.

Do you think these stocks should be trading higher? Use this list as a starting point for your own analysis.

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