7 Stocks Trading Below $5 Undervalued By Free Cash Flow

Do you prefer stocks trading at low share prices? If so, one thing to keep in mind is the possibility of “value traps,” or stocks that appear to hold value with low share prices but in fact are trading there for a negative reason.

We decided to look for stocks that are undervalued by levered free cash flow/enterprise value. This will provide a starting point for your analysis. This ratio gives us the money that the business can use to grow and pay dividends to shareholders. Any possibility of a dividend payout nowadays is looked at positively. We also screened for stocks with a market cap of at least $300 million, and trading under $5.

Interactive Chart: Press Play to compare changes in market cap over the last two years for the seven stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.

Do you think these stocks trading under $5 are a cheap bargain? Use this list as a starting point for your own analysis.

Analyze These Ideas: Read  descriptions for all companies mentioned

1. AK Steel Holding Corporation ( AKS): Produces flat-rolled carbon, stainless, and electrical steels, and tubular products primarily in the United States and internationally. Market cap at $567.66M, most recent closing price at $4.28. Levered free cash flow at $249.55M vs. enterprise value at $1.80B (implies a LFCF/EV ratio at 13.86%).

2. Alcatel-Lucent, S.A. ( ALU): Provides products, solutions, and transformation services that enable service providers, enterprises, governments, and strategic industries to deliver voice, data, and video communication services to end-users worldwide. Market cap at $2.59B, most recent closing price at $1.11. Levered free cash flow at $656.25M vs. enterprise value at $2.64B (implies a LFCF/EV ratio at 24.86%).

3. Crown Media Holdings Inc. ( CRWN): Through its subsidiary, Crown Media United States, LLC, owns and operates pay television channels in the United States and Puerto Rico. Market cap at $676.2M, most recent closing price at $1.88. Levered free cash flow at $161.37M vs. enterprise value at $1.10B (implies a LFCF/EV ratio at 14.67%).

4. Denison Mines Corp. ( DNN): Engages in the exploration, development, mining, and milling of uranium primarily in the United States and Canada. Market cap at $470.46M, most recent closing price at $1.21. Levered free cash flow at $43.76M vs. enterprise value at $402.85M (implies a LFCF/EV ratio at 10.86%).

5. Harmonic Inc. ( HLIT): Designs, manufactures, and sells video products and system solutions that enable service providers to deliver broadcast and on-demand services. Market cap at $561.53M, most recent closing price at $4.85. Levered free cash flow at $75.14M vs. enterprise value at $355.66M (implies a LFCF/EV ratio at 21.13%).

6. Nokia Corporation ( NOK): Provides Internet and digital mapping and navigation services worldwide. Market cap at $14.53B, most recent closing price at $3.79. Levered free cash flow at $1.39B vs. enterprise value at $9.07B (implies a LFCF/EV ratio at 15.33%).

7. Portugal Telecom SGPS SA ( PT): Provides telecommunications services in Portugal, Brazil, and Africa. Market cap at $4.24B, most recent closing price at $4.73. Levered free cash flow at $2.44B vs. enterprise value at $13.96B (implies a LFCF/EV ratio at 17.48%).

 

Written by Kapitall’s Sabina Bhatia

 

 

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