Five Value Stocks With Growth Potential

BOSTON ( TheStreet) -- With interest rates at record lows, the stock rally could extend into the first quarter. Instead of piling into hot names, investors should check out these cheap stocks.

5. J.M. Smucker ( SJM) sells jams and jellies.

The numbers: Fiscal second-quarter net income soared almost tripled to $140 million as earnings per share climbed 26% to $1.18, hurt by a higher share count. Revenue grew 52% to $1.3 billion. J.M. Smucker's gross margin rose from 31% to 39%, and its operating margin jumped from 11% to 18%. Its balance sheet is liquid, with $410 million of cash. A debt-to-equity ratio of 0.3 indicates modest leverage.

The stock: J.M. Smucker has risen 34% this year, more than the Dow Jones Industrial Average and S&P 500 Index. The stock trades at a price-to-earnings ratio of 16, a discount to the market and packaged-food peers. The shares offer a 2.4% dividend yield.

4. W.W. Grainger ( GWW) distributes facility maintenance products.

The numbers: Third-quarter net income increased 3% to $145 million, or $1.88 a share, as revenue fell 14% to $1.6 billion. Grainger's gross margin was unchanged at 42%, but its operating margin declined from 13% to 12%. The company has a strong financial position, with $672 million of cash, compared to $535 million of debt.

The stock: Grainger has risen 24% this year, beating the Dow and S&P 500. The stock trades at a price-to-earnings ratio of 17, a discount to the market and distributors. The shares offer a 1.9% dividend yield.

3. Lincoln Educational Services ( LINC) provides career training.

The numbers: Third-quarter profit more than doubled to $14 million, or 50 cents a share, as revenue grew 48% to $148 million. Lincoln's gross margin rose from 63% to 65%, and its operating margin increased from 10% to 16%. The company has a strong financial position, with $38 million of cash and $37 million of debt.

The stock: Lincoln has advanced 69% this year, beating major U.S. indices. The stock trades at a price-to-earnings ratio of 15, a discount to the market and education peers. Lincoln doesn't pay dividends.

2. Church & Dwight ( CHD) sells household products.

The numbers: Third-quarter net income rose 43% to $70 million, or 98 cents a share, as revenue inched up 2% to $646 million. Church & Dwight's gross margin widened from 43% to 49%, and its operating margin expanded from 15% to 18%. A quick ratio of 1.1 indicates adequate liquidity. A debt-to-equity ratio of 0.5 reflects conservative leverage.

The stock: Church & Dwight has risen 6% this year, less than major U.S. indices. The stock trades at a price-to-earnings ratio of 18, which is on par with household-product makers, but a discount to the market. The shares offer a 1% dividend yield.

1. Village Super Market ( VLGEA) owns a ShopRite chain.

The numbers: Fiscal fourth-quarter net income declined 3% to $6.7 million, or 50 cents a share, as revenue grew 4% to $311 million. Village Super Market's gross margin inched from 27% to 28%, but its operating margin was unchanged at 4%. The company has $55 million of cash and $37 million of debt.

The stock: Village Super Market has climbed 8% this year, trailing major U.S. indices. The stock trades at a price-to-earnings ratio of 15, a discount to the market and food retailers. The shares offer a 3% dividend yield.

Now see five fast-growing stocks to buy >>>

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