Buy This Undervalued LCD Display Stock for A 20% Gain ByPhil AshFollow | 05/18/15 - 12:26 PM EDT0 Get TheStreet Quant Ratings' exclusive 5-page report for (AUO) - FREE.
NEW YORK (TheStreet) -- A good $5 stock is hard to find, especially one that is sitting in the middle of an enormous growth curve in the red-hot tech sector.
Buy AU Optronics (AUO - Get Report) now for a quick jump up to $6, where it traded back in January 2015. AUO is in the top 20% of all stocks based on its book value to market value ratio. And once the market figures this out, the stock price will jump.
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This nearly $4.9 billion company is a Taiwanese manufacturer of flat panel displays used in a wide variety of consumer electronics products such as high-def televisions, smartphones, notebook computers, and the touch-screen technology now being used in automobiles and payment-processing terminals.
Roughly 20% of large thin-film transistor LCD (TFT) panels in the world are produced by AU Optronics. Almost all Sony (SNE) televisions in 2014 used AU Optronics flat panels, while Panasonic, LG (LG), Toshiba, Philips (PHG) and others also use AU Optronics panels. And the company is one of only two manufacturers of curved LCD panels used in the fast-growing curved display market.
Furthermore, the company's factories are invested in green manufacturing, utilizing wind power and achieving 90%-plus water recycling rates.
With worldwide television, laptop, smartphone, and car display sales continuing to rise, AU Optronics is well-positioned to grow sales over the long run. However, the company's stock has been beaten down in 2015 due to a 0.7% year-to-date sales decline versus 2014.
Why AU Optronics Is Undervalued But Strong
From a book to market perspective, AU Optronics earns a perfect score of 100% from Baton Investing's Joseph Piotroski model. Piotroski is a college accounting professor who has become legendary for discovering undervalued stocks by examining their financial statements.
The reason our Piotroski model ranks AU Optronics so highly is that it aces four of his most critical tests, the first of which compares a company's book value to its current stock market capitalization. In this case, the company has a book-to-market ratio of 1.05, placing it in the top 20% of the more than 6,000 stocks that we measure. A ratio in excess of 1.0 implies that a stock is currently priced at less than the company's actual value from a balance sheet perspective, suggesting that sooner or later that excess value will be recognized by the market.