4 Upgraded, Undervalued Stocks

NEW YORK ( TheStreet) -- The following stocks received upgrades to buy from TheStreet Ratings on Friday and are undervalued compared with their peers: Cadence Design Systems ( CDNS), Energy XXI ( EXXI), Atlas Air Worldwide ( AAWW) and Myriad Genetics ( MYGN).

Cadence Design Systems

The electronic design automation software and hardware company on Wednesday reported fourth-quarter earnings of $11 million, or 4 cents a share. In the previous fourth quarter, Cadence Design posted a loss of $37 million, or 14 cents a share.

The stock hit a 52-week high of $11.84 on Thursday. The stock's 52-week low of $8.09 was set on Aug. 19. The stock has risen 12.02% year to date.

"Management took a bold stance during the earnings call when it outlined plans toachieve a mid-20s operating margin in 2013," D.A. Davidson analysts wrote in a report Thursday. "While margins should benefit from solid revenue growth and the leverage already imbedded in the model, if revenue growth wanes, management appears willing to implement meaningful cost reductions to meet this aggressive goal. This achievement would bring CDNS' operating margins in line with industry-leader Synopsys (SNPS* - BUY - $29.49) and ultimately drive an EPS run rate in excess of $1.00 per year exiting 2013."

Six of the eight analysts who cover Cadence consider it a buy. Two analysts rated it a hold.

Cadence Design's estimated price-to-earnings ratio for next year is 13.55. The average for the software industry is 33.34. Rovi ( ROVI) has a low forward P/E ratio of 12.74.

TheStreet Ratings gives Cadence a B- grade with $14.18 price target. The stock closed Thursday at $11.64.

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Energy XXI

The oil and natural gas company on Wednesday reported fiscal second-quarter earnings of $93.4 million, or $1.11 a share. In the second quarter of last year, the company reported a loss of $11.3 million, or 17 cents a share.

Energy XXI's estimated P/E for next year is 8.74. The average forward P/E for exploration and production companies is 274.28.

"We are increasing our target price by $1 to $40 on the greater-than-expected oil price premium and the increase in oil production from recent drilling projects," Capital One analysts wrote in a report Friday. "We continue to like the stock with our new target representing 16% upside but note that a solid Davy Jones flow test result of 40+ MMcfe/d gross (news expected by March) is likely needed to keep the stock moving significantly higher."

Fourteen of the 15 analysts who cover the stock rated it a buy. One considered it a hold.

TheStreet Ratings gives Energy XXI a B- grade with a $44.51 price target. The stock closed Thursday at $34.61 and has risen 11.97% year to date.


Atlas Air Worldwide

The aircraft delivery company announced Wednesday that it financed its six remaining B747-8F aircraft deliveries.

Atlas Air Worldwide's estimated P/E for next year is 8.85. The average for the delivery services area of the market is 14.25.

"Despite the difficulties Atlas had in 3Q11, the earnings potential in 2012 should continue to be strong for the company," Dahlman Rose analysts wrote in a report in November. "Management lowered EPS expectations for 2011 to +$4.30, down from +$5.00 and compared to the initial expectations of +$5.30. We are intrigued bythe outlook for 2012 for two reasons. The new -8F is finally in service, and each aircraft adds $0.04/share/month. The other new business is the passenger AMC business, which should also contribute to the bottom line."

Eight of the 12 analysts who cover Atlas rated it a buy. Four considered it a hold.

TheStreet Ratings gives Atlas Air a B- grade with a $56.66 price target. The stock closed Thursday at $48.67 and has risen 31.23% year to date.

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Myriad Genetics

The molecular diagnostic company reported last month second-quarter earnings of $28.3 million, or 33 cents a share. Earnings increased 17% from the previous year.

Myriad Genetics' estimated P/E for next year is 16.7. The average forward P/E among biotechnology companies is 44.38. United Therapeutics ( UTHR) had a forward P/E of 7.81.

Of Myriad Genetics' Prolaris presentation at the ASCO-GU conference Thursday, Oppenheimer analysts wrote in a report Thursday, "MYGN is ramping up its sales force, doubling the size to 20, as mgmt believes prostate cancer to represent a large opportunity with an annual incidence of 241k pre-prostatectomy patients and a prevalence of 1M post-prostatectomy patients. Initial launch is planned in the pre-prostatectomy indication, with payor talks ongoing."

Eleven of the 20 analysts who cover the company rated it a buy. Nine considered it a hold.

TheStreet Ratings gives Myriad a B- grade with a $27.69 price target. The stock closed Thursday at $23.66 and has increased 15% year to date.

>>To see these stocks in action, visit the 4 Upgraded, Undervalued Stocks portfolio on Stockpickr.


The following companies also received upgrades to buy from TheStreet Ratings Friday.
  • Hyatt Hotels: (H) B- grade from TheStreet Ratings and a $49.61 price target. The stock closed Thursday at $42.84.
  • Intersil: (ISIL) B grade from TheStreet Ratings and a $13.48 price target. The stock closed Thursday at $11.02.

-- Written by Alexandra Zendrian

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