When stock analysts do the proverbial deep dive into a company, they look for those that are hitting on all cylinders, not just on sales and revenue, but with pristine balance sheets to match. In a new report, Jefferies ran a screen looking for stocks that match a very stringent set of guidelines.
The Jefferies team screened for stocks that had positive return on invested capital, were under-levered and had EV/EBITDA under eight times, which equals a company’s enterprise value divided by earnings before interest, tax, depreciation and amortization. Lastly, they looked for positive earnings revisions and companies bigger than $4 billion in market capitalization.
Of the 19 stocks that met the grueling metrics, we picked the five top companies to buy.
This company literally can be considered almost a value technology stock. Intel Corp. (NASDAQ: INTC) was recently highlighted as one of the companies having among the highest shareholder cash returns at approximately 8%. This goes along with any outstanding free cash flow yield of 7.63%. The iconic chip giant had a stellar 2014 on the tailwind from continued personal computer (PC) and notebook sales, but it has suffered this year as PC sales have slowed. The stock has underperformed the S&P 500 year to date.
Intel warned first-quarter earnings and forward guidance would be less than expected, and it delivered just that back in April. The stock has turned up since and is offering patient investors a solid entry point. With that in mind, PC sales for the second quarter are tracking below estimates, so investors should be cautious and scale into the stock
Intel investors are paid an outstanding 3.0% dividend. The Thomson/First Call consensus price target is $34.64. Shares closed trading on Thursday at $32.38.
This is a top chemical company with a sterling balance sheet. LyondellBasell Industries N.V. (NYSE: LYB) manufactures chemicals and polymers, refines crude oil, produces gasoline blending components and develops and licenses technologies for production of polymers. After getting crushed last fall, the stock has rallied back nicely.
The company has generated an outstanding earnings per share (EPS) growth rate of 20.63%. What is even more impressive is the European chemical giant is looking to grow EPS at a rate of 7.13%, which is much higher than the industry average of 2.44%.
With outstanding cash flow growth, and a huge market share standing, the stock makes good sense for long-term growth investors.
Shareholders are paid a very solid 3.1% dividend. The consensus price objective is $110.84. Shares closed trading on Thursday $104.82.