Growth In US Manufacturing
Two surveys released on Tuesday January 3rd highlighted that December US manufacturing activity grew at its fastest rate in about two years. The surveys also highlighted that “new orders” grew at its fastest rate since 2009 suggesting that US manufacturers will continue to see increasing demand over the coming months. It was also reported that the increase was primarily driven from buyers within the US.
Opportunity for Investors?
This stock screen was used to find manufacturing companies that appear be trading at a discount to intrinsic value.
Note that while improving demand is typically a good sign for US manufactures, the strengthening of the US dollar could make it more difficult for these companies to sell products overseas. Due to demand being primarily driven domestically in addition to the strong dollar, the screened stocks were then filtered to find manufacturing companies that generate the majority of their revenues within the United States.
5 Undervalued US Manufacturers with 25% Upside Potential
Finbox.io fair value data (as of January 4th) shows that there are only 5 US manufacturing stocks that have 25% or more margin of safety: Vera Bradley (Nasdaq:VRA), Cooper Tire & Rubber (NYSE:CTB), Farmer Bros (Nasdaq:FARM), Allergan (NYSE:AGN) and Motorcar Parts of America (Nasdaq:MPAA).
Vera Bradley manufactures and sells handbags, accessories, luggage and travel items for women. The company's shares trade at approximately 58% of its 52 week high. Finbox.io fair value data implies that the stock is currently 45% undervalued while Wall Street's consensus price target of $14.40 implies 16% upside.
<img src='http://res.cloudinary.com/finbox/image/upload/v1483549563/1_-_VRA_j8i2pm.jpg' alt= ‘VRA finbox.io fair value estimate’>
Cooper Tire & Rubber manufactures and markets replacement tires. Although shares are trading near their 52 week high, ten separate valuation analyses conclude an intrinsic value of approximately $53 per share (37% upside).
<img src='http://res.cloudinary.com/finbox/image/upload/v1483549563/2_-_CTB_ozzfiy.jpg' alt= ‘CTB finbox.io fair value estimate’>
Farmer Bros engages in the manufacture and distribution of coffee, tea, and culinary products. The company's stock is also trading near its 52 week high but finbox.io fair value data implies that there is still nearly 30% upside. Wall Street's consensus price target of $42.50 implies 17% upside.
<img src='http://res.cloudinary.com/finbox/image/upload/v1483549562/3_-_FARM_gq6pdk.jpg' alt= ‘FARM finbox.io fair value estimate’>
Allergan develops, manufactures and distributes medical aesthetics, biosimilar, and over-the-counter pharmaceutical products. The company's shares are trading at approximately 95% of its 200 day moving average. The $261.63 consensus price target from 19 Wall Street analysts implies over 20% upside. Finbox.io data supports Wall Street's price target.
<img src='http://res.cloudinary.com/finbox/image/upload/v1483549562/4_-_AGN_vzhzmb.jpg' alt= ‘AGN finbox.io fair value estimate’>
Motorcar Parts of America manufactures, remanufactures and distributes aftermarket automotive parts. The stock last traded at $28.14, well below its 52 week high of $38.78. Nine unique cashflow models imply a fair value of $35.28 while Wall Street's consensus price target stands even higher at $36.25.
<img src='http://res.cloudinary.com/finbox/image/upload/v1483549563/5_-_MPAA_l3um5n.jpg' alt= ‘MPAA finbox.io fair value estimate’>
These US manufacturing stocks have strong fundamentals and could all benefit from increasing demand over the next several months. Value investors may want to take a closer look at these names.