Close

Low P/E Stocks With Positive Earnings Surprises

by John Bajkowski

Low P/E Stocks With Positive Earnings Surprises Splash image

A stabilizing economy and improvement in productivity helped to usher in a wave of positive surprises this past quarter. Seventy-two percent of the stocks covered by AAII’s Stock Investor Pro screening program reported quarterly earnings that surpassed the consensus forecast—the definition of a positive earnings surprise. Contrarian investors have observed that positive surprises are even more dramatic events for value-oriented stocks since the surprise often triggers a change (for the better) in the market perception of a company.

This issue’s First Cut screens for stocks with below-average forward price-earnings ratios (price divided by expected earnings per share) that have reported a positive earnings surprise and upward revisions in future earnings expectations.

While there is an immediate market reaction to a surprise or an earnings revision, there is often a long-term price impact as well—supporting the notion that it may not be too late to buy an attractive company after a better-than-expected earnings report. Studies indicate that a positive effect can persist for as long as a year after the announcement.

The stocks that made this issue’s First Cut are exchange-listed companies tracked by at least four analysts that had a significant positive quarterly surprise since the beginning of September with a below-average forward price-earnings ratio. These companies have also seen at least a 5% increase during the last month in their consensus earnings estimates for their current and following fiscal years, and they are expected by analysts to have positive earnings. Only the top 30 stocks with the largest percentage surprise made the First Cut.

The listing also includes the percentage change in the consensus fiscal-year estimate, to indicate how analysts have adjusted their expectations; the consensus long-term earnings growth rate estimate; and the 13- and 52-week relative price strength ranks, to highlight short- and long-term price momentum.

Company (Exchange: Ticker) Quarterly EPS Current Fiscal-
Year EPS
P/E
Ratio
(Est
EPS)
(X)
EPS
Growth
Rate
Est
(%)
Price
Strength
Rank
Share
Price
(11/13)
($)
 
 
Ann'l
Est
($)
Monthly
Change
(%)
 
Report
Date
Est
($)
Surprise
(%)
13-Wk
(%)
52-Wk
(%)
 
Description
OSI Systems, Inc. (M: OSIS) 10/27 0.07 91.8 1.21 8.9 16.1 19.2 55 75 19.38 electronic systems
Service Corporation Int'l (N: SCI) 11/4 0.07 85.7 0.48 19.5 15.6 8.8 39 54 7.48 funeral homes & cemeteries
99 Cents Only Stores (N: NDN) 11/4 0.08 84.2 0.63 8.8 20.8 13.8 46 43 13.18 general merchandise
NewMarket Corporation (N: NEU) 10/22 2.15 80.5 11.09 28.4 9.7 15.0 88 92 107.87 chemicals & prop holding co
Innophos Holdings, Inc. (M: IPHS) 11/2 0.38 80.2 3.34 18.2 7.1 -5.0 84 61 23.56 specialty phosphates
Fuel Systems Solutions (M: FSYS) 11/5 0.43 79.9 2.43 44.5 19.6 22.4 91 58 47.67 alternative fuel components
Par Pharmaceutical Co. (N: PRX) 11/6 0.49 57.5 2.36 19.6 9.7 51.6 85 81 22.83 drug holding co
HEALTHSOUTH Corp. (N: HLS) 11/3 0.24 55.7 1.52 15.9 11.6 15.2 70 70 17.59 rehab healthcare servs
Genoptix, Inc. (M: GXDX) 11/5 0.34 55.0 1.63 10.8 22.0 25.8 83 30 35.80 hematology diagnostics
Cabela's Incorporated (N: CAB) 10/27 0.18 53.0 1.24 6.7 10.5 11.4 19 81 12.98 direct market outdoor merch
NVR, Inc. (N: NVR) 10/21 7.60 52.5 30.41 21.9 22.4 12.5 63 77 681.38 home construction
Schweitzer-Mauduit Int'l (N: SWM) 11/3 0.93 50.3 4.08 8.8 15.3 20.0 86 96 62.50 paper & tobacco prods
AllianceBernstein Hold'g LP (N: AB) 10/29 0.45 48.2 1.70 21.5 16.0 9.0 80 67 27.12 financial research holding co
A. O. Smith Corporation (N: AOS) 10/16 0.69 44.1 2.66 14.3 15.9 -8.0 53 60 42.45 water heating equip
TeleTech Holdings, Inc. (M: TTEC) 10/28 0.23 39.1 1.20 13.1 16.4 19.8 73 86 19.66 business process outsourcing
Odyssey HealthCare (M: ODSY) 10/28 0.25 38.9 1.17 12.4 12.6 13.3 75 71 14.77 hospice care provider
Micrel, Incorporated (M: MCRL) 10/22 0.08 37.5 0.30 22.6 23.7 5.0 28 41 7.21 integrated circuits
Corinthian Colleges (M: COCO) 10/29 0.28 34.1 1.58 17.7 10.0 24.1 37 39 15.78 post-secondary education
Western Digital Corp. (N: WDC) 10/22 0.94 33.5 4.58 25.9 8.4 8.3 79 90 38.50 hard drive manufacturer
Polo Ralph Lauren Corp. (N: RL) 11/3 1.31 33.4 4.16 9.3 19.4 12.8 79 80 80.84 apparel & accessories
Invacare Corporation (N: IVC) 10/22 0.39 33.3 1.53 7.0 15.6 na 77 67 23.80 home medical equip
Perrigo Company (M: PRGO) 11/2 0.50 33.1 2.42 15.0 16.6 13.7 91 48 40.19 pharmaceuticals
Bristow Group Inc. (N: BRS) 11/4 0.66 32.4 2.96 11.7 11.5 7.0 67 74 34.18 helicopter servs
Eaton Corporation (N: ETN) 10/19 0.92 32.0 2.47 23.8 26.1 10.1 76 70 64.53 diversified power mgmt 
Werner Enterprises (M: WERN) 10/19 0.20 30.7 0.78 15.8 25.1 8.2 61 35 19.46 truckload shipment hauling
Bio-Rad Laboratories (N: BIO) 11/3 1.06 30.4 4.96 5.9 19.8 12.3 74 64 97.96 life sciences analysis prods
Lincoln Educational (M: LINC) 11/5 0.39 29.5 1.69 13.2 13.2 24.2 36 73 22.23 post-secondary education
iGATE Corporation (M: IGTE) 10/20 0.13 28.0 0.52 13.7 17.8 16.0 83 79 9.29 information technology
Fossil, Inc. (M: FOSL) 11/10 0.42 23.8 1.89 10.7 17.0 16.0 81 82 32.06 consumer accessories
Steris Corporation (N: STE) 11/3 0.44 23.3 1.99 5.4 17.5 15.0 78 45 34.73 surgical support servs

 


 

John Bajkowski is president of AAII.


Discussion

No comments have been added yet. Add your thoughts to the discussion!

You need to log in as a registered AAII user before commenting.
Create an account

Log In