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(ERIC GAILLARD)
(ERIC GAILLARD)

TheStreet.com

Ten U.S. stocks selling at deep discounts Add to ...

U.S. stocks slid last month, with the S&P 500 falling 4.7 per cent as investors loaded up on fixed-income securities. Here are 10 stocks struggling despite exceptionally cheap price-to-earnings ratios. When stocks rebound, these stocks may fare best. The companies are ordered by forward earnings multiple, from cheap to cheapest.

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10. Humana offers health and supplemental benefit plans. Second-quarter profit increased 21 per cent to $340 million, or $2 a share, as revenue grew 9.5 per cent to $8.7 billion. The operating margin rose from 5.9 per cent to 8.2 per cent. Humana has $8.9 billion of cash and $1.7 billion of debt, equal to a quick ratio of 1.7 and a debt-to-equity ratio of 0.3. During the past three years, Humana has grown revenue 11 per cent annually, on average, and boosted profit 24 per cent a year. Its stock trades at a trailing earnings multiple of 7.1, a forward earnings multiple of 8.6, a book value multiple of 1.3, a sales multiple of 0.3 and a cash flow multiple of 3.6 -- 51 per cent, 31 per cent, 48 per cent, 60 per cent and 59 per cent discounts to peer averages. Of analysts covering Humana, 9, or 43 per cent, advise purchasing its shares, 11 recommend holding and one suggests selling them. A median price target of $55.73 suggests a return of 16 per cent.

9. Goldman Sachs is a global full-service investment bank. Second-quarter profit tumbled 82 per cent to $613 million, or 78 cents a share, as revenue decreased 31 per cent to $10 billion. The operating margin narrowed from 42 per cent to 40 per cent. Goldman Sachs has $258 billion of cash and $540 billion of debt, equal to an elevated debt-to-equity ratio of 7.3. Since 2007, Goldman has increased net income 5.9 per cent a year, though earnings per share fell 2.6 per cent a year. Its stock sells for a trailing earnings multiple of 7.2, a forward earnings multiple of 7.7, a book value multiple of 1, a sales multiple of 1.5 and a cash flow multiple of 2.1 -- 46 per cent, 45 per cent, 35 per cent, 31 per cent and 85 per cent discounts to capital markets industry averages. Of researchers following Goldman, 24, or 86 per cent, rate its stock "buy" and four rate it "hold." None rank it "sell." A median target of $189.79 implies 39 per cent of upside. Deutsche Bank offers a price target of $205.

8. SLM Corp. provides education finance in the U.S. SLM swung to a second-quarter profit of $338 million, or 63 cents a share, from a loss of $123 million, or 31 cents, a year earlier. Revenue gained 13 per cent. The operating margin narrowed from 61 per cent to 57 per cent. SLM Corp. holds $13 billion of cash and $199 billion of debt, equal to an excessive debt-to-equity ratio of 39. During the past three years, SLM's net income has dropped 8.5 per cent a year, on average. Its stock trades at a trailing earnings ratio of 5.4, a forward earnings multiple of 7.7, a book value multiple of 1.1 and a sales multiple of 0.8 -- 58 per cent, 37 per cent, 51 per cent and 43 per cent discounts to consumer finance industry averages. Of analysts evaluating SLM Corp., six, or 60 per cent, rate its stock "buy" and four rate it "hold." None rank it "sell." A median target of $15.50 suggests a potential return of 40 per cent. FBR offers a price target of $19, implying 71 per cent of upside.

7. Coventry Health Care is a managed-health-care company. Its second-quarter profit plummeted 95 per cent to $1 million, or 1 cent per share, as revenue fell 18 per cent to $2.9 billion. The operating margin extended from 2.9 per cent to 9.9 per cent. Coventry has $1.5 billion of cash and $1.6 billion of debt, converting to a quick ratio of 1 and a debt-to-equity ratio of 0.4. Since 2007, Coventry has grown sales 14 per cent annually, on average, as net profit dropped 22 per cent a year. Its stock sells for a trailing earnings multiple of 9.5, a forward earnings multiple of 7.7, a book value multiple of 0.8, a sales multiple of 0.2 and a cash flow multiple of 8.6 -- 35 per cent, 38 per cent, 68 per cent, 63 per cent and 2 per cent discounts to health care peer averages. Of researchers covering Coventry, six, or 32 per cent, advocate purchasing its shares and 13 recommend holding them. A median price target of $25.64 suggests a return of 31 per cent. BMO offers a price target of $33.

6. Ace provides a range of insurance and reinsurance products. Second-quarter profit expanded 27 per cent to $677 million, or $1.98 a share, as revenue increased 6 per cent to $3.8 billion. The operating margin widened from 19 per cent to 23 per cent. Ace has $5 billion of cash and $3.6 billion of debt, equal to a debt-to-equity ratio of 0.2. Since 2007, Ace has grown sales 4.1 per cent a year, on average, increased net income 3.6 per cent a year and boosted earnings per share 3 per cent a year. Its stock trades at a trailing earnings multiple of 6.3, a forward earnings multiple of 7.3, a book value multiple of 0.9, a sales multiple of 1.2 and a cash flow multiple of 4.9 -- 58 per cent, 27 per cent, 80 per cent, 76 per cent and 44 per cent discounts to insurance industry averages. Of analysts covering Ace, 21, or 88 per cent, rate its stock "buy" and three rate it "hold." None rank it "sell." A median target of $65.98 implies 24 per cent of upside. JPMorgan forecasts that the stock will rise 37 per cent to $73.

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