4 stocks for long-term investors
Here are some picks with very low valuations relative to their 5-year growth prospects.
Our newest growth stock recommendations cover a wide range of industry sectors and market caps, with revenues ranging from $1 billion to $50 billion.
What they share, however, are five-year earnings growth prospects averaging close to 20% a year and very low price valuations. Here's a look at four of our latest ideas: AGCO (AGCO), Cisco Systems (CSCO), Genesco (GCO) and Triumph Group (TGI).
AGCO, a 20-year-old Georgia company, burst onto the scene in the early 1990s by acquiring and turning around a collection of aging, underperforming farm equipment companies nobody else wanted.
The share price slumped from $70 to $20 during the 2007 to 2009 recession. But it has bounced back from a recent low of $32 in early October to around $42 Monday as resurgent equipment purchases by farmers have pushed earnings back above $4 a share.
And with earnings expected to grow 19% a year and a price-to-earnings ratio of less than 10, we look for a move well into the $50-range or higher.
Soundly financed with excellent cash flow, AGCO has been diversifying from tractors and combines (75% of sales) into broader agricultural markets worldwide.
We’re taking a bit of a leap with networking giant Cisco. Quarter after quarter it reported discouraging results, cuttings its price in half from $27 in 2010 to $14 last summer.
Now it’s back around $18 or $19 (hitting $18.38 midday Monday) on a string of upbeat developments, including better quarterly earnings, a revamped switching portfolio and solid progress in its data center business.
Cost-cutting and product innovation in the face of stiff competition have also helped to win upgraded analyst ratings, with 26 of 45 firms calling CSCO a "buy" compared to 20 three months ago.
Estimated five-year earnings growth of 10% is only half of what we prefer in our stocks. However, for 2012 and 2013 we look for 15% a year. A price-to-earnings ratio of 10 makes this technology-rich mega-cap stock look attractive.
Genesco operates a regional chain of stores selling footwear, headwear, and accessories out of Nashville, Tenn. The 88-year-old retailer has excellent present-day prospects.
There’s nothing flashy about Genesco; it is simply a well-run business getting good results. Earnings growth is projected at a solid 16.5% a year.
Against those expectations, the stock is priced at just 13 times 2012 earnings with an attractive price/earnings-to-growth ratio of 0.80.
With the share price backing off from over $60 in the recent correction, and seven out of nine analysts calling it a "strong buy," we’ve added GCO to our list with an initial price target of $70 -- an implied gain of close to 30%.
Triumph Group of Berwyn, Penn., produces and services aircraft and aerospace products and systems worldwide, with revenues of over $3 billion.
It has weathered the stock market storms better than most in recent months, hitting a new 52-week high of $59.
Earnings are estimated to grow 14% a year, after a nearly 50% jump in 2011. Yet its price-to-earnings ratio is a mere 10.8 and its price/earnings-to-growth ratio is 0.78.
The Wall Street target price is $67, but we can see it topping $70 on a price-to-earnings multiple upgrade as earnings head above $5 and near $6 per share.
Is Apple a value stock?
Dividends: The royal road to riches
4 standouts for growth, income
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
With the universe of this category in its seasonal sweet spot, these picks have tailwinds propelling them into the new year.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.