Ten More Takeover Candidates

Yesterday, we had a quick look at ten potential takeover targets from a list of 50 offered up recently by Deutsche Bank DB strategists. Here we glance at another ten from their list of leveraged buyout candidates. Again, the companies on their list have market capitalizations of less than $25 billion. All have positive free cash flows 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 additional investment from acquirers. American Eagle Outfitters AEO is a mall-based retailer that sells casual apparel and accessories targeted to younger customers. The company has a market cap of $2.5 billion and a P/E ratio of 12.9. The PEG ratio is 1.0 and the long-term EPS growth forecast is 13.1%. Its share price has fallen about 12% in the past month. The stock has underperformed the apparel store industry average, as well as the broader markets, year to date. American Greetings AM has a market cap of $859.2 million and is the second largest maker of greetings cards in the United States. It has a dividend yield of 2.5%. Its 10.3 P/E ratio is lower than the industry average P/E of 26.4. The share price is about the same as it was three months ago. The stock's performance has been in line with the broader markets year to date, but less than the industry average. Century Aluminum CENX produces aluminum at facilities in Kentucky, West Virginia and Iceland. The company has a market cap of $1.2 billion. Its 18.9 P/E ratio is lower than the industry average P/E of 33.2. The long-term EPS growth forecast is 20.5%. Shares are about 6% lower than they were at the beginning of the year and trading around the 52-week low. Yet, the stock has outperformed its industry average in that time. Entergy ETR has a market cap of $12.1 billion and it provides electricity and natural gas to 2.7 million customers in southern states. The company has a dividend yield of 4.9%, a return on equity of 14.8% and a P/E ratio of 9.5. The share price is about 4% lower than it was at the beginning of the year. The stock has underperformed both the electric utilities industry average and the broader markets in that time. Forest Laboratories FRX has a market cap of $10.8 billion. The company develops and manufactures name-brand and generic prescription and over-the-counter pharmaceutical products. Its return on equity is 15.5%. The P/E ratio is 8.6, which is much less than the industry average of 33.8. The stock is more than 18% higher year to date, with shares now trading near the 52-week high. KLA-Tencor KLAC has a market cap of $6.9 billion and is one of the world's largest makers of semiconductor equipment. The company has a dividend yield of 2.4% and a return on equity of 21.9%. The P/E ratio is 8.9 and the PEG ratio is 0.9. Year to date, shares are up about 6%, outperforming both the broader markets and the semiconductor equipment industry average. Kohl's KSS operates more than 1,000 discount department stores, and it has a market cap of $14.3 billion. The company has a P/E ratio of 13.2, as well as a long-term EPS growth forecast of 13.5%. Shares have traded mostly between $51 and $55 since last fall. And so the stock has underperformed the department store industry average, as well as the broader markets, year to date. Northrop Grumman NOC has a market cap of $18.7 billion and is one of the world's largest military contractors. The company has a 2.9% dividend yield and a return on equity of 15.4%. The P/E ratio is 9.2 and the PEG ratio is 0.8. Its share price is about 5% lower than three months ago. Year to date, the stock has underperformed the broader markets but outperformed the conglomerates sector average. Progress Software PRGS, which has a market cap of $1.6 billion, develops and distributes application infrastructure software for the development, deployment and management of business applications software. Its PEG ratio is 0.9 and the long-term EPS growth forecast is 14.3%. The share price has fallen about 17% in the past month but is still well above the 52-week low. Yet, the stock has underperformed the industry average year to date. Symantec SYMC provides security, storage and systems management software to businesses and consumers. The company's market cap is $14.2 billion. Its 13.3 P/E ratio is lower than the industry average P/E of 24.2. The share price is about 12% higher than at the beginning of the year. But the stock's performance is in line with the security software and services industry average during that time.