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Email ArticleTo identify potentially attractive investment ideas, The Applied Finance Group (AFG) usually uses a combination of proprietary variables to develop a focused group of potential buy ideas that meet criteria based on valuation, economic performance, management quality, and earnings quality. Although this set of investment criteria has proven successful in generating buy ideas, AFG’s valuation on a standalone basis has consistently been able to identify mispriced securities and investment opportunities that outperform their chosen benchmark.
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The chart below contains 10 of the cheapest stocks in the S&P 500 based on AFG’s valuation metric which has proven through vigorous back-testing to identify companies that are more likely to outperform than their sector peers. Companies include Apollo Group Inc., (NASDAQ:APOL) and Pfizer Inc. (NYSE:PFE).
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AFG |
Rank within Sector |
| Ticker |
Name |
Sector |
Investment Opportunity |
Valuation Signal |
| Cheapest Stocks In The S&P 500 |
| (NASDAQ:APOL) |
APOLLO GROUP A |
Miscellaneous |
Attractive |
Attractive |
| (NASDAQ:GILD) |
GILEAD SCIENCES |
Health |
Attractive |
Attractive |
| (NYSE:AZO) |
AUTOZONE INC |
Consumer Services |
Attractive |
Attractive |
| (NYSE:FCX) |
FREEPORT-MCMORAN B |
Basic Material |
Attractive |
Attractive |
| (NYSE:PFE) |
PFIZER |
Health |
Attractive |
Attractive |
| (NYSE:CLF) |
CLIFFS NATURAL RESOURCES |
Energy and Extraction |
Attractive |
Attractive |
| (NYSE:LSI) |
LSI |
Technology |
Attractive |
Attractive |
| (NYSE:GD) |
GENERAL DYNAMICS |
Capital Goods |
Attractive |
Attractive |
| (NYSE:VLO) |
VALERO ENERGY |
Energy and Extraction |
Attractive |
Attractive |
| (NYSE:LLL) |
L-3 COMMUNICATIONS HLDGS |
Capital Goods |
Attractive |
Attractive | |
AFG’s valuation techniques help investors identify and take advantage of mispriced securities in the market. One way investors can identify over or undervalued stocks is by using AFG’s Intrinsic Value Chart, which displays a company’s intrinsic value relative to its trading range and helps entry/exit points. Below is an example of Apollo Group (NASDAQ:APOL) one of the companies from our list of the 10 cheapest S&P 500 companies using AFG’s Intrinsic Value Chart to illustrate how well we have tracked the company as well as a visual representation of the company’s trading range relative to its default intrinsic value.
Apollo Group (NASDAQ:APOL), is a company that currently looks undervalued according to AFG’s default valuation model. An important fact to note is that AFG has shown it tracks Apollo Group well (high accuracy score of 77). Also, Apollo has a current AFG Value Score of 99, meaning the company ranks in the top 99th percentile of companies in the AFG universe in valuation attractiveness.

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Applied Finance Group’s (AFG’s) Value Score defined - A score which represents the ranked percent to target (deviation between stock’s current trading price and AFG’s current default target price) or attractiveness (upside) relative to the universe. A Value Score of 100 is the most undervalued and 0 is the most overvalued company in the universe.
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