Zacks.com Announces That Richard Moroney Highlights the Following Stocks: Electronics Boutique, QLT, United Fire & Casualty, Finish Line, and Penn National Gaming.

CHICAGO -- Implied price can be a useful tool in selecting attractive stocks. Richard Moroney explains the benefits of this calculation and highlights three stocks from his buy list that currently trade at a discount. Read about Electronics Boutique (NASDAQ:ELBO), QLT (NASDAQ:QLTI), United Fire & Casualty (NASDAQ:UFCS), The Finish Line, Inc. (NASDAQ:FINL), and Penn National Gaming, Inc. (NASDAQ:PENN). Richard Moroney is editor of the Upside newsletter. Click here for the full story exclusively on Zacks.com: http://at.zacks.com/?id=84

Here are the highlights from the Featured Expert column:

Relative to historical norms, some stocks are attractive values

The most widely used of all valuation metrics, the price/earnings ratio is easy to calculate and intuitive -- it simply relates stock prices to corporate profits. More important, P/E ratios work; stocks with low P/Es tend to outperform, as do those with low P/Es relative to their historical norms.

With that in mind, Richard Moroney and his team calculated implied prices based on historical P/E ratios. Implied prices show where a stock would trade if its P/E ratio returned to its historical average. Reviewed below are stocks trading at a discount to the prices implied by both trailing and forward historical P/E ratios.

Electronics Boutique (NASDAQ:ELBO), one of the largest specialty retailers of video and computer games, has solid growth prospects. A strong new-product outlook bodes well for industry sales. This year up to eight game titles are projected to outsell the top title of 2003. Full-year sales are expected to increase 17% to 21%. Management expects earnings per share of $1.90 to $2.00. At 14 times expected year-ahead earnings, the shares trade well below their five-year average forward P/E of 18. Based on trailing earnings, the P/E multiple is 16 -- far below the five-year average of 20.

QLT's (NASDAQ:QLTI) main product is Visudyne, the only approved treatment for age-related macular degeneration, a leading cause of blindness. To bolster its drug portfolio, the company recently agreed to buy Atrix Laboratories, which focuses on dermatology and oncology treatments. The combined company targets annual earnings growth of 20% to 25% on sales growth of 15% to 20%. QLT retreated on the news, partly on concerns that the stock will trade at a lower P/E. QLT should earn at least $0.90 per share over the next four quarters. Applying the three-year forward P/E to that figure implies a $27 stock price. Based on historical P/E, the shares have a target price of $23.

Shares of United Fire & Casualty (NASDAQ:UFCS) have surged nearly 42% so far in 2004, fueled by impressive results. The property-and-casualty division (85% of 2003 profits) sells commercial and personal policies through more than 1,000 agents in the Midwest, West, and South. The life-insurance business (15%) offers policies through nearly 1,500 agents in 25 states, with a focus on small Iowa banks. Based on five-year average trailing P/E ratio, the stock's implied price is $75. Using the five-year forward P/E puts the implied price near $62. In Moroney's view, a move to $65 seems achievable based on the company's earnings momentum.

Other stocks on the Upside Buy List include:

The Finish Line, Inc. (NASDAQ:FINL) is one of the largest mall based specialty retailers of brand name athletic, outdoor and casual footwear, activewear and accessories in the United States.

Penn National Gaming, Inc. (NASDAQ:PENN) is a diversified gaming and pari-mutuel wagering company.

Read Richard Moroney's complete commentary, along with more information on the above-mentioned stocks, by clicking: http://at.zacks.com/?id=85

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