Tuesday, December 20, 2011

best stocks priced under $20 to buy 2012

best stocks priced under $20 to buy 2012 ; With the country slowly coming out of a recession and the situation in Europe holding back the market, it’s good to see stocks still making a profit for investors. Through consistent earnings and growth opportunities, I’ve identified the five stocks under $20 that are most likely to double in price next year.

Cisco Systems, Inc. (CSCO) – With CSCO attempting to recover from a decline within recent months, it’s the first stock on our list that could see an increase in price going forward. The stock has a beta of 1.16, making it slightly more volatile than the market. The stock currently offers a dividend to investors of $0.24 or 1.40% annually. With earnings per share of $1.16, CSCO has a price to earnings ratio of 15.2. This is slightly less than the industry at 18.2 and the S&P 500 at 24.0. This gives the indication that CSCO could be undervalued.

When comparing CSCO to close competitor Juniper Networks, Inc. (JNPR), CSCO has the lower price to earnings ratio of the two. JNPR has a price to earnings ratio of 21.25 and also has a lower net income of $519.2 million compared to CSCO’s net income of $6.34 billion. Some speculate that CSCO could be considered a Buffett stock.

One aspect of a stock that he looks for is consistent earnings power which CSCO has demonstrated in the past. In addition, CSCO has a return on equity of 14% while having a debt to equity ratio of 36%. Ultimately, with the company’s consistent earnings power and return on equity, CSCO is a stock that could easily double in price in the future. On a discounted cash flow basis, shares are worth over $30 apiece going into 2013.

Dell, Inc. (DELL) – Another stock that has seen profits as of late is Dell, Inc. With earnings per share of $1.94, DELL has a price to earnings ratio of 7.4, which is almost half the industry ratio of 12.7. DELL is slightly volatile with a beta of 1.26, but the company’s earnings have been stable. Currently, the stock does not have a dividend that it offers to investors.

DELL’s biggest competitor is tech giant International Business Machines Corp. (IBM). Comparing the two, IBM has the higher net income of $15.62 billion compared to DELL’s $3.66 billion. However, IBM has the higher price to earnings ratio of 13.95, which is higher than the industry ratio.

DELL has currently decided to try and compete with IBM by growing its enterprise solutions and services business. By focusing on this new business, DELL ceded its position as the second largest PC vendor. Although there was a decline in their PC business, by focusing on a new growth strategy DELL could double in price in the upcoming quarters.

Fifth Third Bancorp. (FITB) – With a beta of 2.60, FITB is the most volatile stock on the list, and is more than twice as volatile as the market. Currently trading around $11 per share, FITB is one of the relatively cheaper stocks on the list as well. The stock offers a dividend of $0.32, or 2.90% dividend yield annually.

With earnings per share of $1.19, FITB has a price to earnings ratio of 9.5. This is more than half the industry average of 20.2, giving the stock the perception of being undervalued. If the stock is able to move up to the industry average without sacrificing earnings, then it would double in price making a handsome profit for investors.

One of FITB’s larger competitors is Bank of America Corporation (BAC). Although BAC has higher revenue of $75.36 billion compared to FITB at $5.66 billion, BAC currently posted a loss in net income of $3.07 billion. FITB’s current net income is a profit of $1.05 billion. FITB’s stock has been going up as the company’s third quarter results were $0.40 which was higher than the average expectation of $0.33. These earnings were up 14% from last quarter and 82% from the same quarter as the year prior. If FITB is able to continue with the earnings increase, then the stock could easily double in price.

The Gap, Inc. (GPS) – With the holidays right around the corner, retail companies hope to see a sharp increase in profits. GPS is no different. The stock is slightly more volatile than the market with a beta of 1.22. Currently, the company offers a dividend of $0.45, or a yield of 2.60%. With earnings per share of $1.72, GPS has a price to earnings ratio of 10.2, which is lower than the industry of apparel stores currently at 14.3. However, it can be noted that the price to book value of GPS at 3.38 is slightly higher than the industry of 2.95.

Comparing the price to earnings ratio to competitor American Eagle Outfitters, Inc. (AEO), GPS has the lower ratio. AEO has a current price to earnings ratio of 15.2. In addition, AEO has the lower net income of $168.15 million compared to GPS net income of $980 million.

With the holidays approaching, Black Friday is most talked shopping day of the year. With every company fighting for the same consumers, many retailers are reducing prices to attract buyers. Although this might cut into the company’s profit margin by reducing prices, ultimately the added sales will boost the company’s bottom line. In the long run, GPS should benefit from the holiday shopping and continue an upward trend, doubling the company’s stock price.

Pfizer, Inc. (PFE) – The leashttp://www.blogger.com/img/blank.gift volatile stock in this analysis, PFE has a beta of 0.90. This also makes it a less risky investment than the market. PFE also has the highest dividend yield at 4.30%, which is $0.80 annually. Based on the company’s earnings per share of $1.44, the company has a price to earnings ratio of 14.5. This is slightly lower than the industry at 15.3, but still well below the S&P 500.

One of the direct competitors of PFE is Merck & Co. Inc. (MRK). Comparing the two companies, PFE has the better earnings with a net income of $10.18 billion compared to MRK’s net income of $4.22 billion. In addition, MRK has a much higher price to earnings ratio of 24. Ultimately, with the company’s earnings power and growth, PFE could double in price in the future.source http://seekingalpha.com
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