Buy Lexmark International –$28.80

Lexmark International Inc. (NYSE-LXK)
Price May 24, 2011-$28.80

OMG, another NYSE listed pick!

When you can find high quality stocks on the NYSE trading at less than 50% of our valuation formula, you gotta buy them.

LXK has disappointed analysts with non-growth in earnings, causing it to fall to this 52 weeks low . Sales in the March quarter were down 1% at $1.034 billion and EPS was $1.14 versus $1.35 last year (both non-GAAP numbers). Guidance for Q2 was tepid also at about $1.00 per share in earnings versus $1.23 last year.

Never mind about these numbers. LXK is still looking to make over $4.00 per share in earnings this year and is trading at just over 7 times earnings. Its market cap is $2.4 billion, well within the affordability of PE firms and lots of other strategic buyers.

LXK also has about $8 per share in net cash-over 25% of its market cap. We would not be surprised to see a buyout in the future if it stays at these price levels.

Average trading volume is over 1 million shares a day.

About Lexmark International, Inc. (NYSE:LXK – News) provides businesses of all sizes with a broad range of printing and imaging products, software, solutions and services that help customers to print less and save more. Perceptive Software, a stand-alone software business within Lexmark, is a leading provider of enterprise content management software that helps organizations easily manage the entire lifecycle of their documents and content, simplifying their business processes, and fueling greater operational efficiency. In 2010, Lexmark sold products in more than 170 countries and reported more than $4 billion in revenue.


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