4-Star Stocks Poised to Pop: Cliffs Natural Resources

Based on the aggregated intelligence of 170,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, iron ore miner Cliffs Natural Resources (NYSE: CLF) has earned a respected four-star ranking.

With that in mind, let's take a closer look at Cliffs' business and see what CAPS investors are saying about the stock right now.

Cliffs facts

Sources: Capital IQ (a division of Standard & Poor's) and Motley Fool CAPS.

On CAPS, 96% of the 1,285 members who have rated Cliffs believe the stock will outperform the S&P 500 going forward. These bulls include All-Star griderX, who is ranked in the top 1% of our community, and stocky5.

Just last week, griderX listed several of Cliffs' positives:

1. Free Cash Flow Yield of around 8%
2. Net Margins of 20 % and increasing
3. Price to Sales of around 2.4
4. Solid Mangement ... they took on some cheap debt and bought out [Consolidated Thompson Iron Mines] (Gateway to Asia Steel Market)

Currently, Cliffs even sports a cheapish forward P/E of 6.9. That represents a discount to listed rivals BHP (11.3), Peabody (11.8), and Teck (8.2).

CAPS member stocky5 elaborates on the bargain opportunity:

The 2011 outlook for iron ore production is positive. Analysts have been raising their target price for [Cliffs] recently, and the company has been consistently beating quarterly earnings estimates. There is also room for P/E multiple expansion at current price levels, in addition to favorable earnings surprises. Currently undervalued.

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