A key to determining this is using the PEG ratio. The PEG ratio divides a stock’s forward price-to-earnings (P/E) ratio by its projected earnings growth rate. A number under 1 means the market is paying less per expected dollar of earnings than the projected growth rate suggests it should. Based on this, there is reason to believe the stock is undervalued. Other metrics to consider are the company's P/E ratio versus its industry, a strong return on equity (ROE), and projected earnings growth.
Here are three companies that score well based on these criteria to consider.
