According to the Peter Lynch Growth Screener, a Premium feature of GuruFocus, five stocks that are undervalued based on the Peter Lynch earnings line and have high GF Score are AMN Healthcare Services Inc. (AMN, Financial), Industrias Bachoco SAB de CV (IBA, Financial), Korn Ferry (KFY, Financial), P.A.M. Transportation Services Inc. (PTSI, Financial) and Heidrick & Struggles International Inc. (HSII, Financial).
The legendary Fidelity Magellan Fund manager defined a simple measure to find undervalued stocks using a company’s price line and earnings line. Lynch set his earnings line at 15 times earnings per share and labeled a stock as undervalued if the price line falls below the earnings line.
GuruFocus’ Peter Lynch Growth Screen applies the above concept by considering stocks with price-earnings ratios less than 14. The screener also focuses on stocks in non-cyclical sectors that have high business predictability and a 10-year revenue growth rate of at least 6%.
Among the stocks meeting the Peter Lynch Growth Screen, five stocks are also undervalued based on GF Value and have a GF Score of at least 90 out of 100. Patterned after the Peter Lynch earnings line, GuruFocus’ exclusive valuation method considers several historical price multiples and adjusts for past growth and future business growth estimates.
The GF Score has been found to closely correlate with long-term performance of stocks based on backtesting from 2006 to 2021. GuruFocus’ exclusive stock rank considers five key aspects: financial strength, profitability, GF Value, growth and momentum. Each individual rank is scored from zero to 10, while the overall score ranges from zero to 100.
GuruFocus’ backtesting research has shown that stocks with high GF Scores usually have higher returns than stocks with low GF Scores. According to the Model Portfolios page, the GF Score Less Than 100 model portfolio has returned 15.01% during the year to date, outperforming the Standard & Poor’s 500 Index benchmark return of 7.56%.
AMN Healthcare Services
Shares of AMN Healthcare Services (AMN, Financial) traded around $88.14 on Friday, showing the stock is significantly undervalued based on its price-to-GF Value ratio of 0.65. The stock’s price-earnings ratio of 9.01 is near a 10-year low and outperforms approximately 89% of global competitors.
The Dallas-based health care staffing company has a GF Score of 93 out of 100 based on a momentum rank of 3 out of 10, a financial strength rank of 6 out of 10 and a rank of 10 out of 10 for profitability, growth and GF Value.
AMN Healthcare Services’ high growth rank is driven by several positive investing signs, which include a five-star business predictability rank and a three-year revenue growth rate of 35.8%, which outperforms approximately 86% of global competitors.
Gurus with holdings in AMN Healthcare Services include Steven Cohen (Trades, Portfolio)’s Point72 Asset Management and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Industrias Bachoco
Shares of Industrias Bachoco (IBA, Financial) traded around $52.88 on Friday, showing the stock is modestly undervalued based on its price-to-GF Value ratio of 0.83. The stock’s price-earnings ratio of 8.44 outperforms approximately 77% of global competitors.
The Mexico-based producer of eggs and chicken products has a GF Score of 95 out of 100 based on a rank of 9 out of 10 for profitability and financial strength, a growth rank of 10 out of 10, a GF Value rank of 7 out of 10 and a momentum rank of 6 out of 10.
Industrias Bachoco’s high growth rank is driven by several positive investing signs, which include a four-star business predictability rank and a three-year revenue growth rate of 17.1%, which outperforms approximately 81% of global competitors.
Korn Ferry
Shares of Korn Ferry (KFY, Financial) traded around $49.20 on Friday, showing the stock is modestly undervalued based on its price-to-GF Value ratio of 0.85. The stock’s price-earnings ratio of 10.38 outperforms approximately 72% of global competitors.
The Los Angeles-based consulting and management recruitment company has a GF Score of 95 out of 100 based on a growth rank of 10 out of 10, a profitability rank of 9 out of 10 and a rank of 7 out of 10 for financial strength, GF Value and momentum.
Korn Ferry’s high growth rank is driven by several positive investing signs, which include a 4.5-star business predictability rank and three-year revenue and earnings growth rates that outperform more than 76% of global competitors.
P.A.M. Transportation Services
Shares of P.A.M. Transportation Services (PTSI, Financial) traded around $25.41 on Friday, showing the stock is modestly undervalued based on its price-to-GF Value ratio of 0.81. The stock’s price-earnings ratio of 6.29 outperforms approximately 73% of global competitors.
The Tontitown, Arkansas-based trucking company has a GF Score of 95 out of 100 based on a growth rank of 10 out of 10, a profitability rank of 9 out of 10, a momentum rank of 8 out of 10, a GF Value rank of 7 out of 10 and a financial strength rank of 6 out of 10.
P.A.M. Transportation Services’ high growth rank is driven by several positive investing signs, which include a four-star business predictability rank and three-year revenue and earnings growth rates outperforming more than 88% of global competitors.
Heidrick & Struggles
Shares of Heidrick & Struggles (HSII, Financial) traded around $27.86 on Friday, showing the stock is modestly undervalued based on its price-to-GF Value ratio of 0.83. The stock’s price-earnings ratio of 7.16 is near a 10-year low and outperforms approximately 87% of global competitors.
The Chicago-based leadership advisory company has a GF Score of 95 out of 100 based on a growth rank of 10 out of 10, a profitability rank of 9 out of 10, a financial strength rank of 6 out of 10 and a rank of 7 out of 10 for GF Value and momentum.
The company’s high growth rank is driven by several positive investing signs, which include a 4.5-star business predictability rank and a three-year revenue growth rate of 12.3%, which outperforms approximately 75% of global competitors.
