The Underappreciated Metric That Spotlights Bargain Stocks: Wal-Mart Stores Inc (WMT), Interactive Brokers Group Inc (IBKR)

Calamos Asset Management, Inc (NASDAQ:CLMS)
This firm provides asset management services to institutions and high-net-worth individuals. Its recent financial performance has been underwhelming in recent years, thanks in part to a conservative investment approach that was out of sync with the bull market during the past four years.

Still, asset management is a steady and profitable business, and Calamos has generated at least $100 million in free cash flow in each of the past nine years.

Moreover, Calamos:

• Is buying back shares.
• Consistently generates a return on assets above 20%.
• Has solid insider buying.
• Has been steadily boosting its dividend (which now yields more than 4%).
• Trades just above tangible book value.

With those metrics in place, along with the considerable FCF yield, value investors are bound to takenote.

Over the next few days, I’ll be profiling mid- and large-cap FCF yielders as well.

Risks to Consider: The companies on the table above have generated meager or even negative revenuegrowth in recent years, and a downturn in the U.S. economy would make it hard for them to generate a revenue rebound.

Action to Take –> This is an exercise that should apply to many companies in your portfolio. If a company is largely mature, then it should be expected to generate solid free cash flow to offset the mature top line characteristics. The only exception is younger, growing companies that have solid reasons to hike capital spending now for sales and profit growth down the road, a theme that I discussed in this column.

This article was originally written by David Sterman, and posted on StreetAuthority.