5 Undervalued Stocks Trading Below Target Prices

Emily Smykal, Kapitall: Who doesn't like a good bargain? We looked for companies that are trading below even their lowest target price. 

Besides looking for stocks that don't cost an arm and a leg, savvy investors use many tricks to find bargains among the market's many offerings. One way to do so is to consider a company's target price as set by independent analysts.To generate this list we began by searching for stocks that are trading at significant discounts to their fair value based on analyst target price, with the assumption that they will move up to their fair value in the near future. 

[Read more from Kapitall: For-Profit Schools: Investing in Our Health?]

We only included stocks with five or more analyst ratings. And because analyst prices are notoriously inflated, we compared current price to the lowest target. Besides screening for rock bottom prices, we also wanted to find signs of undervaluation, so we considered price to free cash flow as an indicator of undervaluation. Price to free cash flow looks at how expensive a company's stock is versus the amount of cash that it is bringing in, minus capital expenditures. Generally, the lower the valuation, the cheaper the stock – although it's always important to keep in mind the specific trends in given industries.

Taken together, we were left with only five stocks on our list. 

Dig Deeper: Compare analyst ratings to annual returns for stocks in this article. 

Click on the interactive chart to see data over time. 

Do you think these stocks will move up to their target prices? Use the list below as a starting point for your own analysis. 

1. Silicon Motion Technology Corp. ( SIMO, Earnings, Analysts, Financials): Operates as a fabless semiconductor company. Market cap at $96.53M, most recent closing price at $11.81. 

Of the 5 analysts that have set a target price on the stock, the lowest price target stands at $13.5. This implies a potential upside of 15.48% from current levels around $11.69.

Price to Free Cash Flow: 1.86

 

2. State Bank Financial Corporation ( STBZ, Earnings, Analysts, Financials): Operates as the holding company for State Bank and Trust Company that provides community banking services to individuals and businesses in the middle Georgia and metropolitan Atlanta areas. Market cap at $509.11M, most recent closing price at $16.01.

Of the 6 analysts that have set a target price on the stock, the lowest price target stands at $18. This implies a potential upside of 15.61% from current levels around $15.57.

Price to Free Cash Flow: 3.98

 

3. Delek US Holdings Inc. ( DK, Earnings, Analysts, Financials): Engages in refining, wholesaling, and marketing petroleum products in the United States. Market cap at $1.30B, most recent closing price at $22.00. 

Of the 9 analysts that have set a target price on the stock, the lowest price target stands at $32. This implies a potential upside of 31.52% from current levels around $24.33

Price to Free Cash Flow: 10.29

 

4. Spansion Inc. ( CODE, Earnings, Analysts, Financials): Engages in the design, development, manufacture, and sale of flash memory semiconductors worldwide. Market cap at $611.09M, most recent closing price at $10.35.

Of the 7 analysts that have set a target price on the stock, the lowest price target stands at $14. This implies a potential upside of 30.48% from current levels around $10.73.

Price to Free Cash Flow: 11.30

 

5. Cadence Design Systems Inc. ( CDNS, Earnings, Analysts, Financials): Develops electronic design automation software and hardware for customers worldwide. Market cap at $3.85B, most recent closing price at $13.79.

Of the 9 analysts that have set a target price on the stock, the lowest price target stands at $16. This implies a potential upside of 20.57% from current levels around $13.27.

Price to Free Cash Flow: 12.97

 

 

( List compiled by Emily Smykal. Analyst ratings sourced from Zacks Investment Research, target price data sourced from Yahoo! Finance, all other data sourced from Finviz.)

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