Visa Inc (V), PulteGroup, Inc. (PHM), Seagate Technology PLC (STX): The Outlook for Three Heavily Sold-off Companies

The dog of the group
Unfortunately, I am less positive on my third decliner, Seagate Technology PLC (NASDAQ:STX), which is down 3% over the past month — this, after the company reported dismal EPS results of $1.20 per share, beating estimates but falling 50.2% year on year. Revenue also collapsed 23.6% to $3.4 billion.

Previously, I was positive on Seagate Technology PLC (NASDAQ:STX). The company looks undervalued when compared to the rest of the market, trading at an earnings yield of 11.7% versus a market average of 5.2% and the Treasury yield of 2.6%. However, Seagate Technology PLC (NASDAQ:STX)’s management noted on the conference call that the company is currently working through a period of “uncertainty and opportunity,” and adding: “Looking ahead, we believe the market trends of data growth driven by cloud, mobile and open-source advancement will present new and significant opportunities for Seagate.”

These are factors that could significantly affect Seagate Technology PLC (NASDAQ:STX)’s outlook, and with earnings falling as rapidly as they are at present, I want to stay away. In this situation, a company that currently looks undervalued can quickly become overvalued.

Having said that, Seagate Technology PLC (NASDAQ:STX) is still cash-generative, and the company’s free cash flow was $2.2 billion during the second quarter — approximately 236% of gross income. This allows the company to buy back both stock and debt without digging into cash.

Foolish summary
These three plays all offer some interesting objectives. Visa is a no-brainer: The company is swimming in cash, and the restrictions in Europe will not hamper global expansion, which I believe is worth significantly more. PulteGroup, Inc. (NYSE:PHM) is now a longer-term play. The hot money has left the company, presenting a good chance for investors to buy in. Finally, Seagate Technology PLC (NASDAQ:STX) is an odd one, but the cash generation is good, and if the company can recover, it will be profitable. That said, the current outlook does not look promising.

The article The Outlook for Three Heavily Sold-off Companies originally appeared on Fool.com and is written by Rupert Hargreaves.

Fool contributor Rupert Hargreaves has no position in any stocks mentioned. The Motley Fool recommends Visa. The Motley Fool owns shares of Visa.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.