These 7 Undervalued Stocks Are Attractive Takeover Targets

John Dorfman, chairman of Thunderstorm Capital, argues that the following seven stocks are takeover candidates.  What do you think of his picks? Of particular interest to Dorfman is the ratio of the company’s enterprise value to its EBTIDA, the EV/EBITDA ratio.  He argues that ratios under 5 indicate good takeover candidates.  Enterprise value is the combined value of a company’s stock and debt and EBITDA refers to “earnings before interest, taxes, depreciation, and amortization.”  Therefore, the ratio shows how effective the company’s sources of funding (equity and debt) are at generating operating earnings.

  • Coventry Health Care (NYSE:CVH): The shares have traded in a 52-week range of $16.61 to $35.55 and most recently traded at $35.04 per share.  Its forward price to earnings ratio is 10.72, its price to sales ratio is 0.44, and its price to book ratio is 0.44.  Its EV / EBITDA ratio is 4.62.  About the company:  Coventry Health Care, Inc. is a managed health care company operating health plans and insurance companies under a variety of names. The Company provides health maintenance organization, preferred provider organization, point of service, Medicare and Medicaid, and Network Rental to members in markets throughout the Midwest, Mid-Atlantic, and Southeast United States.  Competitors include: UnitedHealth Group Inc. (NYSE:UNH), Aetna Inc. (NYSE:AET), Health Net, Inc. (NYSE:HNT), WellCare Health Plans (NYSE:WCG), WellPoint Inc. (NYSE:WLP), CIGNA Corporation (NYSE:CI), Centene Corporation (NYSE:CI), AMERIGROUP Corporation (NYSE:AGP), Magellan Health Services (NASDAQ:MGLN), and Humana, Inc. (NYSE:HUM).
  • GameStop Corp. (NYSE:GME): The shares have traded in a 52-week range of $17.70 to $28.66 and most recently traded at $26.30.  Its forward price to earnings ratio is 8.43, its price to sales is 0.39, its price to book is 1.24, and its EV/EBITA is 4.23.   About the company:  GameStop Corporation operates specialty electronic game and PC entertainment software stores throughout the United States, Australia, Canada and Europe. The Company stores sell new and used video game hardware, video game software and accessories, as well as PC entertainment software, and related accessories and other merchandise.  Competitors include: Best Buy Co (NYSE:BBY), RadioShack Corp. (NYSE:RSH), Conn’s Inc. (NASDAQ:CONN), The Game Group PLC (GMG), and hhgregg, Inc. (NYSE:HGG).
  • Telephone   & Data Systems, Inc. (NYSE:TDS): The shares have traded in a 52-week range of $28.84 to $37.91 and most recently traded at $30.15.  Its forward price to earnings ratio is 20.1, its price to sales is 0.63, its price to book is 0.82, and its EV/EBITDA ratio is 3.9.  About the company:  Telephone and Data Systems, Inc. is a diversified telecommunications company. The Company operates primarily in the cellular, local telephone, and personal communications services markets. Telephone and Data Systems provides telecommunications services throughout the United States.  Competitors include: United States Cellular (NYSE:USM), Verizon Communications (NYSE:VZ), MetroPCS Communication (NYSE:PCS), Leap Wireless International (NASDAQ:LEAP), Sprint Nextel Corp. (NYSE:S), NTELOS Holdings (NASDAQ:NTLS), Shenandoah Telecommunications (NASDAQ:SHEN), CenturyLink Inc. (NYSE:CTL), AT&T (NYSE:T), and USA Mobility (NASDAQ:USMO).
  • Oshkosh Corp. (NYSE:OSK): The shares have traded in a 52-week range f $24.63 to $40.11 and most recently traded at $26.07.  Its forward P/E is 7.34, its price to sales is 0.3, its price to book is 1.55, and its EV/EBITDA is 3.08.  About the company:  Oshkosh Corporation designs, manufactures and markets fire and emergency apparatuses and specialty commercial and military trucks. The Company provides products such as pumpers, aerial and ladder trucks, tankers, rescue vehicles, snow removal vehicles, refuse truck bodies, and concrete mixers.  Competitors include: Navistar International (NYSE:NAV), Federal Signal Corporation (NYSE:FSS), Miller Industries, Inc. (NYSE:MLR), AB Volvo (VOLVY), Spartan Motors Inc. (NASDAQ:SPAR), WABCO Holdings Inc. (NYSE:WBC), Terex Corporaiton (NYSE:TEX), Toyota Motor Corp. (NYSE:TM) and Ceradyne Inc. (NASDAQ:CRDN).
  • Seacor Holdings Inc. (NYSE:CKH):  The shares have traded in a 52-week range of $68.39 to $116 and most recently traded at $94.32.  Its forward P/E is 13.47, its price to sales is 0.75, its price to book is 1.13 and its EV/EBITDA is 4.1.  About the company:  SEACOR Holdings Inc. and its subsidiaries operate a diversified fleet of offshore support vessels. The Company services oil and gas exploration and development activities in the US Gulf of Mexico, the North Sea, West Africa, Asia, Latin America, and other regions. SEACOR also provides environmental services, as well as inland river and offshore aviation services.  Competitors include: Bristow Group Inc. (NYSE:BRS), PHI, Inc. (NASDAQ:PHII), GulfMark Offshore Inc. (NYSE:GLF), Overseas Shipholding (NYSE:OSG), Trico Marine Services (TRMAQ), Hornbeck Offshore Services (NYSE:HOS), General Maritime (NYSE:GMR), and Tidewater (NYSE:TDW).
  • Kulicke & Soffa Industries, Inc. (NASDAQ:KLIC): The shares have traded in a 52-week range of $5.27 to $12.72 and most recently traded at $10.94.  Its forward P/E is 6.36, its price to sales is 0.95, its price to book is 2.04, and its EV/EBITDA is 3.14.  About the company:  Kulicke and Soffa Industries, Inc. designs, manufactures, and markets capital equipment, related spare parts, and packaging materials used to assemble semiconductor devices. The Company also services, maintains, repairs, and upgrades assembly equipment. Kulicke’s equipment is used in wire bonding systems, wafer dicing saws, and die bonders.  BE Semiconductor Industries (BESIY), ASM International N.V. (NASDAQ:ASMI), Amtech Systems, Inc. (NASDAQ:ASYS), Rudolph Technologies (NASDAQ:RTEC), Asyst Technologies (ASYTQ), KLA-Tencor Corp. (NASDAQ:KLAC), CVD Equipment Corp. (NASDAQ:CVV), CyberOptics Corp. (NASDAQ:CYBE), Applied Materials Inc. (NASDAQ:AMAT), and Trio-Tech International (AMEX:TRT).
  • RadioShack Corp. (NYSE:RSH):  The shares have traded in a 52-week range of $12.50 to $23.38 and most recently traded at $12.68.  Its forward P/E ratio is 7.01, its price to sales is 0.3, its price to book is 1.55, and its EV/EBITDA is 3.2.   About the company:  RadioShack Corporation operates a chain of retail consumer electronics goods and services stores located throughout the United States and Mexico, along with wireless phone kiosks in the US, and dealer outlets worldwide. The Company offers consumers wireless phone and other electronic products and services from national brands and exclusive private brands and wireless carriers.  Competitors include: Best Buy (NYSE:BBY), Conn’s Inc. (NASDAQ:CONN), GameStop, Corp. (NYSE:GME), and hhgregg Inc. (NYSE:HGG).

(Note: Selected financial data is sourced from Yahoo! Finance.  All data are assumed to be accurate.)

Father’s Day is Approaching June 19th: Make Your Father the Rich Dad with Wall St. Cheat Sheet’s Winning Newsletter!