NEW YORK ( TheStreet) -- With the leveraged buyout market heating up, TheStreet has identified 10 potential targets, all of which are priced cheaply to earnings and to free cash flow. Immucor's ( BLUD) agreement last Tuesday to be acquired by TPG Capital for $27 a share, or $1.973 billion, representing a 30% premium over the previous market close, and Exco Resources ( XCO) CEO Douglas Miller's continuing attempt to take his firm private, are examples of a frothy LBO market. One Wall Street veteran we spoke to said that "the sweet spot right now is for profitable companies, priced cheaply to free cash flow, with market caps of between $1 billion and $10 billion." This source added "credit spreads have dropped tremendously over the past 18 months, making borrowing easy," for companies looking to acquire. William Simpson, a partner in the corporate practice of Paul Hastings, confirmed that "by historical measures you can get very good leverage and the money is inexpensive." Simpson also told TheStreet that "increased confidence about the stability of earnings" is also driving deals, and that although "there haven't been many megadeals" lately, "people are doing larger deals now." According to Simpson, "the three hottest areas" for LBO deals "have been technology, healthcare and the whole retail restaurant and consumer area" which "part reflects that that area was so dead for a while." In order to come up with a list of attractively-valued profitable companies with the potential to be taken private, we used the FINVIZ.com stock screener select U.S. stocks using these criteria:
Market Capitalization between $1 billion and $10 billion
Price/Trailing Earnings ratio below 10
Price/Forward Earnings ratio below 10
Price/Cash below 5
Price/Free Cash flow below 12
Positive Return on Equity
This produced a list of 11 names, including leverage buyout specialist Kohlberg Kravis Roberts & Co. ( KKR), which we have not included in our final list of 10 target companies. Most of these stocks have seen stellar returns over the past year. For most of these names, analysts are on the fence, which may not be surprising after a run-up in the shares. Here are our 10 LBO targets, sorted by ascending upside implied by the median price target among analysts polled by Thomson Reuters.