Don’t Overthink It: 3 Undervalued Turnaround Stocks: Skullcandy Inc (SKUL), Molson Coors Brewing Company (TAP), GrafTech International Ltd (GTI)

Page 1 of 2

Despite the S&P 500 recently nearing all-time highs, a Foolish investor can still find many underappreciated stocks in this otherwise bullish market.  Regardless of new highs and generous valuations, I have managed to find a wide variety of stocks that appear cheap.  While the concept of finding cheap stocks is simple enough, it only tells half the story, as many great investments are not necessarily cheap, but simply undervalued. I present three companies that I believe are not only cheap, but blatantly undervalued by the market.

Skullcandy Inc (NASDAQ:SKUL)

Skullcandy IncWhy it’s cheap : simply put, Skullcandy Inc (NASDAQ:SKUL)  trades at only 7x its earnings and 6x its forward earnings.  Following the departure of its CEO, slight guidance downward, a downgrade from  Roth Capital, and an incredibly competitive market, the audio retailer’s stock has dropped almost 70% since its IPO.

Why it’s undervalued: first, despite the departure of its CEO, Jeremy Andrus, former founder and CEO Rick Alden will be taking the helm on an interim basis, allowing his company the freedom to take a good hard look at its future CEO.  Second, the company welcomed new CFO Kyle Wescoat to the team and was recently cleared to buy back $28 million worth of its shares, potentially priming itself to be acquired. All things held constant, this buyback would represent a 20% premium if all the buyback value were to be exhausted at today’s prices.

My third point is Skullcandy’s growth. Revenues grew at a 17% clip in its most recent quarter, but the stock was pounded by traders all the same.  Trading with a P/E of 7, however, the market has the company priced as if it is going out of business altogether, yet alone growing.  By acquiring Astro Gaming, Skullcandy Inc (NASDAQ:SKUL) has entered into the gaming headset arena, a strong market riding on the potential of mobile gaming.  Furthermore, the company acquired distribution rights for Europe and is setting up a direct business line of operations in Canada, Brazil, and China.

Highlighting my fourth and final point is the company’s strength through its brand image.  Boasting a number of athletes in a wide variety of sports, the company has many huge names on its “Skullcandy team.”  Ranging from Kevin Durant and Derrick Rose in the NBA, to model Kate Upton, musician Jay-Z, and to the company’s roots in its snow and surf teams, Skullcandy Inc (NASDAQ:SKUL) has celebrity firepower to go up against many other huge competitors.  Facing off with Bose, Sony Corporation (ADR) (NYSE:SNE), Beats by Dre, JVC, and Soul by Ludacris , just to name a few, the company will need to maintain its strong brand image and pricing power to compete.  With its former CEO Rick Alden at the helm, I believe they can do just that, and at these valuations, I am willing to make an investment.

Molson Coors Brewing Company (NYSE:TAP)

Why it’s cheap: Molson Coors Brewing Company (NYSE:TAP) is trading with a P/B of one and a price-to-cash-flow of 8, well below its ten-year averages in each, at 1.2 and 11 respectively.  Furthermore, its forward P/E of 10 is its lowest P/E level for the entire decade, signaling that the company’s short-term growth potential may not be fully priced in yet.

Why it’s undervalued: cementing itself as the number two brand in the United States with its Coors Light beer, things are finally starting to look up a little bit for the beleaguered brewery.  While it is still far behind Anheuser-Busch InBev NV (ADR) (NYSE:BUD)‘s Bud Light, it is great to see signs of domestic growth for the cheaply valued company.  Posting 6% growth year-over-year with its biggest American brand, Molson Coors Brewing Company (NYSE:TAP) finally surpassed Budweiser and will be able to focus on its international operations a little bit more.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!