Newspaper Stock Pixabay
Image source: Pixabay.

While many companies' shares are rising past their fair values now, others are trading at potentially bargain prices. The difficulty with bargain shopping, though, is that you may be understandably hesitant to buy stocks wallowing at 52-week lows. In an effort to separate the rebound candidates from the laggards, it makes sense to start by determining whether the market has overreacted to a company's bad news.

Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.

I choo-choo-choose you
Sure, my subhead may pay homage to Ralph Wiggum from The Simpsons, but the value stock you may be "choo-choo-choosing" for your own portfolio is railroad Kansas City Southern (NYSE:KSU).

First, let's get the nitty gritty out of the way as to why Kansas City Southern is trading at a 52-week low. In the third quarter, Kansas City Southern was light on the Street's EPS estimates by $0.01, and revenue of $632 million (which was down 7% year-over-year) fell $7 million short of Wall Street's consensus. Adding fuel to the fire, in early December the company announced that it expected revenue to drop by a high-single-digit percentage in Q4. Wall Street's estimates had been calling for a roughly 3% drop in revenue in Q4. Weakness in coal prices and demand, as well as a seasonal drop in intermodal transport, appear to be the culprits.

Kansas City Southern
Image source: Kansas City Southern.

On one hand, the coal market's issues aren't going to be remedied overnight. Skeptics have every right to believe coal prices will remain challenged domestically as supply issues are worked through. However, coal is also still the dominant source of electricity generation in the U.S., and it's expected to be a major source of energy in emerging markets such as China and India for decades to come. I suspect the long-term coal outlook is a lot rosier than current sentiment would suggest due to potential overseas demand. I wouldn't rule out the role coal exports could play moving forward.

Long-term fuel costs should also work in the favor of Kansas City Southern, and most railroads for that matter. Moving goods by rail may not deliver goods to the doorstep of a business, per se, but compared to trucking and air freight, it's a cheap and effective form of transportation. As oil prices rise over time, railroads should see a steady rise in demand due to cost-effective and fuel-efficient locomotives.

I also believe the growing population argument holds weight with the railroad sector. As the global population increases, demand for agricultural goods and select commodities should increase too. Remember, we're not trying to time our buys, but instead buy solid business models set up for future growth. In this case the numbers suggest Kansas City Southern's business model is in good shape.

Projected to bring in more than $6 in EPS by 2018, I believe Kansas City Southern could prove quite the bargain for value investors.

Powering down could mean fueling up
Next up we'll switch to the financial sector and examine why IberiaBank (NASDAQ:IBKC), a retail and commercial banking and lending service provider in the Southeastern U.S., might be a value stock you'll want to consider adding to your portfolio.

Images
Image source: Flickr user MyFuture.com.

"Why no love for IberiaBank" you wonder? The big concern has been IberiaBank's ties to the energy industry. With its branches located near the oil-rich Gulf of Mexico, IberiaBank had been thriving when oil was at $100-plus per barrel by making loans to the energy industry. With oil now priced below $35 per barrel, and natural gas around $1.75/MMbtu, those loans could wind up proving toxic if its debtors can't repay.

Now here's the good news: IberiaBank has been proactively reducing its energy industry exposure for multiple quarters. As of the end of the third quarter it noted that just 5.1% of its loan portfolio was tied to the energy industry. In fact, the company reduced its combined energy, indirect automobile, and credit market exposure by $361 million year-to-date. The downside is this could constrain its near-term earnings growth, but it's a smarter long-term move that allows IberiaBank to de-risk and diversify.

Yet, even with energy-related loan concerns and historically low lending rates which have suppressed interest-bearing income, IberiaBank recorded a record $1.07 in EPS in the third quarter. Furthermore, its annualized loan growth surged 15%, and its asset quality improved with legacy non-performing assets and net charge-offs both falling.

Looking ahead, the Federal Reserve's rate increase announcement is going to positively impact IberiaBank's interest-bearing accounts. During its Q3 call, it was noted that a 25 basis point hike would equate to a $0.06 bump in its quarterly after-tax EPS -- and that's not chump change. Tack on a 2.5% dividend yield and a forward P/E of less than 12 and I suspect you have everything needed for an attractively priced regional bank stock. 

I'll get the chopper
Last, but certainly not least, I'd encourage value investors to dig deeper into Bristow Group (NYSE:BRS), a company that primarily provides helicopter services to the offshore oil and gas industry.

Brs Fb
Image source: Bristow Group.

The reason Bristow Group is hovering near a 52-week low probably needs no long-winded explanation. Oil prices are down by roughly two-thirds in less than two years, and the cost to recover fossil fuels offshore is typically higher than it is onshore. Thus, weak demand for new rigs, and the possibility of idling existing rigs at weak prices, makes for a shaky near-term outlook or Bristow Group. In fact, Bristow has missed Wall Street's EPS estimates by anywhere from $0.33 per share to $0.64 per share for five straight quarters.

Things aren't great for the energy sector or Bristow right now; I'll give it that. However, looking at the bigger picture I'd like to think Bristow has what it takes to survive and thrive.

For starters, I don't believe oil will settle at its current price for an extended period of time. Over the long run the industrialization of emerging markets, and markets that haven't even entered the "emerging" stage yet in Africa, are going to be demand drivers for the oil market. It's natural for the oil market to have "hiccups," but the long-term outlook for oil still points to higher prices.

Another point to be made is that Bristow operates in a niche market. Offshore drillers can't simply go out and find dozens of personal and good transport service companies to choose from. Bristow's niche market thus affords it the ability to boast strong pricing power for its services in an expanding energy market.

Bristow's balance sheet is also relatively healthy. Its debt-to-equity of 64% is reasonable considering that it's still generating positive operating cash flow. Unless we see a serious degradation in operating cash flow, there appear to be few concerns about the company meeting its debt obligations.

Looking ahead, Bristow is forecast to grow the $1.99 in EPS it's expected to report in full-year 2016 to $3.68 by 2019. With its stock trading below $23 per share, this looks like a pretty intriguing risk-versus-reward.

Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

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