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

Dividend Stock Alert - Billionaire Robbins' Top Dividend Idea With 70% Upside Potential

Get Paid 3.5% Per Year While Waiting For The Stock Appreciate 70%

Larry Robbins' Glenview Capital Opportunity Fund returned 101.7% in 2013 and Robbins personally made $750 million. The same fund returned 25.3% in 2014. In this FREE REPORT we will share Robbins' top dividend idea that yields 3.5% and has been increasing its dividends for 39 consecutive years. Robbins thinks the stock has the potential to appreciate 70%.

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!