Market Overview

Ten Takeover Candidates

A team of strategists from Deutsche Bank (NYSE: DB) has offered at basket of 50 stocks they believe are potential leveraged buyout targets. The companies on their list have market capitalizations below $25 billion. They have positive free cash flow and net margins that fall below the industry average. They also have low asset growth and low valuation, and none of them would require significant investment.

Here is a quick look at some of the buyout candidates that made the list.

American Electric Power (NYSE: AEP) has a market cap of $18.1 billion and owns the largest electricity transmission system in the United States. It has a dividend yield of 4.7%. Its 12.2 P/E ratio is lower than the industry average P/E of 20.4. Year to date, the share price is up about 4%. The stock has outperformed the electric utilities industry average in that time.

Apollo Group (NASDAQ: APOL) has a market cap of $6.2 billion and offers for-profit education programs through the University of Phoenix and other subsidiaries. The company has a return on equity of 37.9% and a P/E ratio of 8.0. Shares are up about 12% year to date, outperforming the education and training services industry average as well as the broader markets.

Buckeye Technologies (NYSE: BKI) produces cellulose-based specialty materials used in diapers, cosmetics, concrete reinforcement, pharmaceuticals and plastics. The company has a market cap of $953.0 million and a return on equity of 22.6%. The P/E ratio is 13.2 and the PEG ratio is 1.0. The share price is about 14% higher year to date and the stock has outperformed the industry average and the broader markets in that time.

CIGNA (NYSE: CI) has a market cap of $13.3 billion and is a leading purveyor of health insurance in the United States. The return on equity is 53.4%. The P/E ratio of 9.8 is lower than the industry average P/E of 12.0. The share price is up about 35% since the beginning of the year. The stock has outperformed the health care services industry average in that time.

Gannett (NYSE: GCI) has a market cap of $3.2 billion and is a leading newspaper publisher in the United States; USA Today is its flagship paper. The company has a dividend yield of 1.2% and a return on equity of 29.8%. The P/E ratio is 5.7 and the PEG ratio is 0.8. Shares are down about 10% year to date, underperforming the broader markets, but topping the newspaper publishing industry average.

The Gap (NYSE: GPS) has a market cap of $10.2 billion and is a leading purveyor of casual, private-label apparel. Its dividend yield is 2.4% and it has a return on equity of 26.7%. The P/E ratio of 9.5 is lower than the industry average P/E of 14.2. Shares have fallen more than 20% in the past month and at today's open were only about a buck higher than the 52-week low.

Lexmark International (NYSE: LXK) is a leading maker of printers and related products and supplies. It has a market cap of $2.2 billion. The return on equity is 27.9% and the P/E ratio is 5.8. Shares are more than 20% lower than they were at the beginning of the year and trading at a 52-week low. The stock has underperformed its industry average year to date.

Oshkosh (NYSE: OSK) has a market cap of $2.4 billion and makes and sells heavy-duty vehicles and vehicle bodies for commercial, access, fire and emergency, and defense work. The return on equity is 67.4% and the P/E ratio is 4.6. The long-term EPS growth forecast is 10.5%. The stock has fallen about 25% year to date. Shares are trading in the neighborhood of the 52-week low.

Raytheon (NYSE: RTN) has a market cap of $17.2 billion. The maker of Patriot, Sidewinder, and Tomahawk missiles is a top U.S. government contractor. Raytheon's dividend yield is 3.2% and its return on equity is 18.5%. The P/E ratio is 10.3 and the PEG ratio is 1.0. The stock is up about 4% year to date, edging out the aerospace/defense industry average in that time.

Western Digital (NYSE: WDC) is one of the largest independent makers of data storage devices, and it has a market cap of $7.8 billion. The company has a return on equity of 23.5% and a P/E ratio of 9.1. Shares are trading at about the same price they were at the beginning of the year. But the stock has outperformed the data storage devices industry average in that time.

Posted-In: American Electric Power Apollo Group Buckeye Technologies CIGNA Deutsche Bank gannett GAP Lexmark Lexmark International Oshkosh raytheon University of Phoenix usa today western digitalLong Ideas Short Ideas Trading Ideas Best of Benzinga

 

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