Even though Valentine's Day is behind us, you still have a chance to say "I love you" by picking out an undervalued jewel for that special someone's IRA -- even if it's your own!

Our penny-pinching process
In that spirit, and with the help of our community over at Motley Fool CAPS, I'll try to show some belated Valentine's Day love to a few interesting stocks that Mr. Market seems to be neglecting. The approach is far from complicated: I'll run a simple screen for five-star stocks (the highest rating a stock can get in CAPS) that have enterprise value-to-EBITDA (EV/EBITDA) multiples lower than 10. I'll be using EV/EBITDA rather than the more common price-to-earnings ratio so we can account for differences in each company's capital structure.

Meet the Frugals
By running this screen, we'll zero in on statistically cheap stocks that, according to our CAPS community, have plenty of great reasons to trade at much higher levels. So without further ado, here is this week's list of five-star Frugals:



Caps Bulls

Caps Bears

Cal-Maine Foods (NASDAQ:CALM)




Multi-Color Corp. (NASDAQ:LABL)




Canon (NYSE:CAJ)




American Technical Ceramics Corp. (AMEX:AMK)




Industrias Bachoco (NYSE:IBA)




As always, our family of Frugals is dominated by relatively unknown companies domiciled in some snoozer-ish sectors. This week's list is comprised of a decorative labeler, a printer manufacturer, a producer of microwave applications, a provider of construction services, and two poultry producers.

That's OK, though. Here's a quick summary of one particularly interesting Frugal -- Canon Inc. -- as well as what some of our CAPS players are saying about it. Some of the bullish arguments just might keep you from dozing off.

The cannonball's run
After a sweet run-up of nearly 40% in 2006, it may be a bit of a surprise that Canon continues to trade at seemingly attractive levels. Of course, as my Foolish colleague Nathan Parmelee points out, cutthroat competition across all of Canon's product lines from formidable names such as Hewlett-Packard (NYSE:HPQ), Lexmark (NYSE:LXK), and Sony has at least something (and maybe everything) to do with the apparent undervaluation. Add in Canon's sheer size (its market cap is $70 billion), which makes it more disposed to move in line with general business and consumer spending, and you have a company that could easily be perceived as just too big to move.

However, many value-conscious players in CAPS believe that this Japanese stalwart provides all the necessary ingredients of a solid investment. Although I admit that Canon has a bit more exposure to shifts in technology and overall market risk than I normally like to see in my stocks, there's a good investment case to be made for Canon's shares.

For one, there is little doubt that Canon is one of the best-managed global companies you can find. When you sell imaging equipment that's pretty much a commodity these days (printers, digital cameras, copy machines, etc.), savvy business moves are crucial. Under the leadership of CEO and Chairman Fujio Mitarai -- who has been with the company since 1961 -- Canon has been able to generate consistent free cash flow and returns on equity above 15%. Canon has also managed to grow its earnings per share at a compounded annual growth rate of 22% over the last five years.

All things being equal, I'd gladly even pay a premium for Canon's leadership team. Through stock repurchases, stable dividends, and a laser-like focus on costs, Mitarai and his team have proven time and again that they have the best interests of shareholders in mind.

How far can this Canon launch?
Naturally, the question is how long Canon will be able to keep innovating and staying ahead of the curve, so to speak. It's Canon's future rate of growth, after all, that will determine whether the company is a bargain at today's levels.

Many of our CAPS participants believe that the company's product pipeline -- driven primarily by its new multifunctional inkjet printers -- will drive double-digit growth, at least in the near term. The company's latest fiscal report showed top-line growth of 10%, while net income rose 17%. So far, so good. Taken all together, I'd say Canon represents pretty good -- though not bargain-basement -- value at today's prices.

CAPS All-Star dss03 is another Fool who spots a fair bit of value:

"With the growth rates alone I feel this stock is fairly priced. Add a strong cash position, paying down debt, and a dividend yield and this pushes it over the top and makes this a value in my mind."

A Fool's final word
As always, what we say here isn't meant to be taken as a formal recommendation; we only want to generate some possible ideas that you might find worth further research. If you'd like to search for Frugals of your own, read what our CAPS community thinks, or even chime in with your own opinions, click here to get in the game.

That's all for this week, Fools. Be sure to join me next week when I'll highlight another batch of cheap stocks for your perusal. Until then, Frugal on!

For more CAPS-related cheapness:

Fool contributor Brian Pacampara is a Fool who never rushes in and holds no position in any of the companies mentioned. The Fool's disclosure policy always whispers sweet nothings.