If you're aiming to "buy low and sell high," then it makes infinite sense to start your search with bargain-priced stocks. Regularly reviewing a list of stocks trading near their 52-week lows can be a great first step.
Here, I'll try to do the initial legwork for you. To prevent us from being inundated with scores of disparate companies, I'll conduct my search by industry. This will allow us to make some initial comparisons among semi-related companies.
There are 24 industry groups as defined by the Global Industry Classification Standard (GICS): Consumer services is one of them.
Below are the top six companies in this space (by market cap) that are hugging 52-week lows.
P/E Ratio (Trailing)
Service Corp. International
Jack in the Box
Source: Capital IQ, a division of Standard & Poor's; NM = not meaningful.
There's a good mix represented here: from for-profit education (Apollo) to fast food (Wendy's and Jack in the Box) to "deathcare products and services" (Service Corp.) to gambling (Ameristar) to motorsports (International Speedway).
The P/E ratio that jumps out is Apollo's. At around 10 times earnings, its shares are priced for almost no growth. But negative growth is also a possibility because the for-profit schools face regulatory threats. As I write this, the educators are reeling: Strayer Education announced a 20% drop in new student enrollment in its latest quarter and a gloomier outlook for 2011.
On the other side, Wendy's and Ameristar don't have any earnings to create multiples on. That can lead to opportunities, though, if you believe they'll turn things around. Looking closer, both had positive free cash flows in the trailing 12 months. In fact, Ameristar's price-to-free-cash-flow ratio is less than 8 because of less capital spending than in the past.
If you are interested in reading more about these stocks, add them to My Watchlist to find all of our Foolish analysis on them.
Anand Chokkavelu doesn't own shares of any company mentioned. International Speedway is a Motley Fool Inside Value pick. Ameristar Casinos is a Motley Fool Hidden Gems selection. The Fool owns shares of Jack in the Box. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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