Color to the Numbers: Top Large-Cap Value Stocks

Financial websites have given investors more tools than ever to screen the markets for stock ideas. But those screens provide just the raw numbers -- not the story behind them. What might look like the start of a trend could merely be a one-time blip. Let's enlist Motley Fool CAPS to color in the outlines these numbers create.

To find the cream of the crop of large-cap value stocks that have a solid financial foundation yet trade at reasonable prices, we'll screen for stocks with:

  • A market cap of at least $5 billion.
  • A debt-to-equity ratio of less than 0.5.
  • Free cash flow of at least $100 million.
  • A projected five-year earnings growth rate of at least 15%.
  • A forward price-to-earnings ratio of less than 15.

Then we'll tap the collective intelligence of our 82,000-plus CAPS investors to see whether these companies present real opportunities -- or whether they're priced low for a reason.

Opinions with the numbers
Here's a sampling from the list of stocks our screen pulled up today.

Company

Forward P/E

Free Cash Flow
(in Millions)

CAPS Rating
(Out of 5)

Corning (NYSE:GLW)

13.7

$812

*****

National Oilwell Varco (NYSE:NOV)

12.6

$1,011

*****

Johnson Controls (NYSE:JCI)

10.9

$1,085

*****

Garmin (NASDAQ:GRMN)

14.7

$492

****

Oracle (NASDAQ:ORCL)

14.2

$6,588

****

Tyco International

11.4

$3,642

***

Data from Yahoo! Finance and Capital IQ, a division of Standard & Poor's. Star rankings from CAPS. All data as of Jan. 23.

Guiding value
One wouldn't expect a high-growth consumer-device manufacturer to be landing on any large-cap value screens, but GPS maven Garmin did just that. Thanks to the stock's 50% fall from its high of more than $125 per share less than three months ago, Garmin now appears -- at least numerically -- as a value play with a modest earnings multiple.

Analysts expect Garmin's earnings to grow at less than a 20% rate in the next five years, which is less than half of its 41% growth rate over the past five years. The slowing growth assumes significant reductions in margins as prices fall on consumer products, and it appears within reason, given the diverse markets for GPS navigation devices. With a long-term supply agreement with Navteq for mapping data, Garmin is clear of any significant threats to this critical element of its supply chain.

Garmin has also shown that it is on its way to being the clear leader ahead of TomTom in the GPS market. A large population of CAPS investors agrees and weighs in bullishly on Garmin, also citing the lower share price and the company's competitive edge in a flourishing market. Having been a longtime shareholder of Garmin, I am one of the 3,948 CAPS investors (out of the 4,118 who have rated the company) to believe that Garmin will beat the market going forward.

Who's in control?
Having your fortunes tied to the major U.S. automakers was always a positive trait in the past. But with foreign automakers such as Honda and Toyota gaining market share at the expense of Ford (NYSE: F  ) and GM (NYSE: GM  ) these days, such a dependency could backfire on companies in the auto-supply chain. Johnson Controls still earns nearly half of its revenue by selling interior systems to a number of automakers -- foreign and domestic -- and recently noted that North American production will be lower than expected.

Fortunately, Johnson Controls is not content just making automobile instrument panels, seating systems, and headliners. The company also has segments that produce building-efficiency and power solutions, and those segments are growing at double-digit rates. With the softening housing market and the gloom surrounding auto sales having cut some 20% off shares of Johnson Controls in the past three months, some CAPS investors have more reason to be bullish on the company. Citing solid management and a diverse revenue base, 499 of the 514 CAPS investors rating Johnson Controls think it will outpace the market going forward.

Let 82,000 investors be the judge
The collective wisdom of a huge pool of investors can quickly add color to a whitewashed page of numbers. But even with an entire community of qualified opinions acting as the judge, individual investors are still the jury and should perform their own research.

Want to see your favorite screen results run through the wringer in the CAPS community? It's free to tap the knowledge base and even give your own opinion in Motley Fool CAPS.


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