The 10 Most Undervalued Stocks To Kick Off Earnings Season

Airlines and electronics manufacturers dominate the list

Source: Shutterstock

As the majority of publicly traded companies release their results for the fourth quarter of 2017 in the coming weeks, investors will be provided with buying and selling opportunities. Although quarterly earnings results can induce vast market reactions, any impact on stock prices is often short-term. Just because a stock tumbled due to disappointing earnings doesn’t mean that it is not a good investment anymore. In fact, it can be an attractive buying opportunity for as long as the fundamentals remain sound.

I used finbox.io’s stock screener to search for companies that have strong fundamentals and are expected to report earnings soon. The following are all the filters applied in my Earnings Stock Screen:

These are the 10 stocks that resulted from this stock screen as of October 31st.

They are ranked below by their blended upside.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: K12 Inc. 

Source: finbox.io

K12 Inc. (NYSE:LRN) is an education company that offers online curricula, software and educational services to families who homeschool their children or to supplement public school education.

Shares of the company are down -5.4% over the last three months. The stock last traded at $16.51 as of Friday January 12 and six separate valuation analyses imply that there is 35.0% upside relative to its current trading price. K12 is estimated to report earnings on January 25th.

Joel Greenblatt is a notable investor in the K12. His fund currently holds a position worth $0.4 million. Greenblatt is best known for a very specific style of value investing termed: Magic Formula Investing. The company clearly has the fundamental characteristics that make it a perfect fit within his magic formula.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: Western Digital Corp

Source: finbox.io

Western Digital Corp (NASDAQ:WDC) is a data storage company that develops, manufactures, and sells HGST, SanDisk, and WD brands worldwide. Western Digital sells to other equipment manufacturers, retailers and directly to consumers.

Shares of Western Digital are down -4.7% over the last three months and finbox.io’s fair value estimate of $98.02 per share calculated from six cash flow models imply 17.9% upside. The average price target from 26 Wall Street analysts of $114.43 per share implies even further upside.

Western Digital is expected to report earnings on January 25 after the market closes.

Illustrious money manager David Tepper currently owns 2,575,138 shares of WDC which represents 3.2% of his stock portfolio. Tepper, founder and portfolio manager at Appaloosa Management L.P., is widely known for having inspired what’s been dubbed the Tepper Rally of 2010. Through his macro view of the financial markets, Tepper was able to predict not only the stock market rally but the catalysts behind it which ultimately proved to be the Fed’s stimulus. Whatever the catalyst, Tepper is likely expecting a sizable rally in Western Digital’s stock price.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: Hawaiian Holdings, Inc. 

Source: finbox.io

Hawaiian Holdings, Inc. (NASDAQ:HA) is the holding company for Hawaiian Airlines.

Hawaiian Holdings’ stock currently trades at $38.75 per share as of Friday January 12, up 2.4% over the last three months. Finbox.io’s six valuation analyses suggest that shares could increase 36.1% going forward. Hawaiian Holdings is estimated to report earnings on January 23.

It is also important to note that fund manager David Dreman is currently long the stock as revealed in his firm’s most recent 13F filing. Dreman, founder and Chairman of Dreman Value Management, is best known for his contrarian value investing strategy. His published research has proven that out of favor stocks significantly outperform stocks considered to have more favorable outlooks. He obviously expects shares of Hawaiian Holdings to outpeform going forward.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: Alaska Air Group, Inc.

Source: finbox.io

Next on the list, coincidentally, is Alaska Air Group, Inc. (NYSE:ALK) the holding company for Alaska Airlines.

It’s worth noting that highly followed portfolio manager Steven Cohen currently holds a position in Alaska Air Group worth $72.3 million. If you haven’t heard of Billionaire Steven Cohen, you may already know a little about him if you’ve watched Showtime’s hit series Billions. Investing morality aside, Cohen’s real-life results are undeniable. He was the third highest-earning hedge fund manager of 2012 when he made $1.4 billion. No doubt Cohen is expecting big gains from his long position in Alaska Air Group.

Shares of ALK are trading -8.8% lower over the prior three months. But the stock price could end up trading 39.9% higher in 2018 based on Alaska Air Group’s future cash flow projections. Alaska Air Group is expected to report earnings on January 25 before market open.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: Super Micro Computer, Inc.

Source: finbox.io

Super Micro Computer, Inc. (NASDAQ:SMCI) is a server developer and manufacturer. Fortune Magazine ranked Supermicro as the #1 fastest growing IT company in the world.

Super Micro Computer’s stock currently trades at $21.50 per share as of Friday January 12, down -4.9% over the last three months. On a fundamental basis, the company’s stock is trading at a 28.8% discount to finbox.io’s intrinsic value estimate. Super Micro Computer is estimated to report earnings on January 25.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: Electronics for Imaging, Inc.

Electronics for Imaging, Inc. (NASDAQ:EFII) is a company specializing in printing solutions and different types of printers for applications ranging from billboards to floor graphics to textiles.

Shares of EFII are down -27.7% over the last three months. The stock last traded at $30.26 as of Friday January 12 and nine separate valuation analyses imply that there is 28.6% upside relative to its current trading price.

Electronics for Imaging is expected to report earnings on January 31 after market close.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: American Airlines Group Inc

Source: finbox.io

American Airlines Group Inc (NASDAQ:AAL) this holding group of American Airlines, which is the world’s largest airline by fleet size.

Widely respected investor Warren Buffett currently owns shares of American Airlines worth $2,232.0 million. Buffett is a man who needs no introduction and has a total net worth of over $80 billion (4th wealthiest person in the world). Through Berkshire Hathaway, Buffett makes long-term investments as illustrated by the portfolio’s low QoQ turnover rate. As a result, it is notable when Buffett holds a position in a company such as American Airlines.

Shares of the company are up 11.2% over the last three months and finbox.io’s fair value estimate of $70.27 per share calculated from ten cash flow models imply 20.2% upside. The average price target from 18 Wall Street analysts of $63.11 per share similarly offers upside potential. American Airlines is estimated to report earnings on January 26.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: Whirlpool Corporation

Source: finbox.io

Whirlpool Corporation (NYSE:WHR) manufactures and sells home appliances such as washers, dryers, dishwashers, refrigerators and freezers.

Whirlpool’s stock currently trades at $172.75 per share as of Friday January 12, down -2.7% over the last three months. Finbox.io’s eight valuation analyses suggest that shares could increase 18.0% going forward.

David Tepper also has a position in the company worth $67.5 million. Whirlpool is estimated to report earnings on January 25.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: JetBlue Airways Corporation

Source: finbox.io

JetBlue Airways Corporation (NASDAQ:JBLU) is a low-cost American airline, which is currently the sixth largest airline in the U.S.

Illustrious money manager Louis Bacon currently owns 60,000 shares of JBLU in his fund’s stock portfolio. Bacon first came on the scene when he hit a home run in the 1987 stock market crash. Anticipating the crash he was short S&P futures, and then shifted long just as the market bottomed. Therefore, it is worth noting that he currently owns shares of JetBlue Airways.

Shares of the company are trading 12.6% higher over the prior three months. The stock could end up trading 18.2% higher in 2018 based on JetBlue Airways’ future cash flow projections. The airline is expected to report earnings on January 25 before market open.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: Biogen Inc

Source: finbox.io

Biogen Inc (NASDAQ:BIIB) is a biotech company that researches and develops new drug treatments for a variety of diseases.

It’s worth noting that highly followed portfolio manager Ray Dalio currently holds a position in Biogen worth $13.8 million. Dalio is the billionaire investor that founded Bridgewater, one of the largest hedge funds on Wall Street. His hedge fund was likely attracted by Biogen’s strong fundamentals.

The pharma company’s stock currently trades at $335.95 per share as of Friday January 12, down -0.5% over the last three months. On a fundamental basis, the company’s stock is trading at a 17.8% discount to finbox.io’s intrinsic value estimate. Biogen is expected to report earnings on January 25 before market open.

The 10 Most Undervalued Stocks To Kick Off Earnings Season: A Chart

In conclusion, the table below ranks all ten stocks by their blended upside.

Source: Finbox

Value investors may want to look closer into the names above prior to earnings as they all appear to be trading well below their intrinsic values. They’ll become even more attractive on disappointing earnings. Or they may begin to trade closer to their fair value on positive results.

Earnings season is one of the more exciting times of the year for investors. Many stocks will start trading at discounted prices due to poor earnings results.

As of this writing, Matt Hogan did not hold a position in any of the aforementioned securities and this is not a buy or sell recommendation on any security mentioned.


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