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Can You Beat The Market With Out-Of-Favour Stocks Lonmin Plc, Royal Bank of Scotland Group plc And G4S plc?

Trying to find the market’s most undervalued and undiscovered value stocks can be tricky. However, the 52-week low ‘bargain bin’ never fails to throw up some interesting ideas. 

So, here are just three value picks trading at or near their 52-week lows.

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A long decline 

Lonmin (LSE: LMI) crashed to a 52-week low at the beginning of this week, tracking the price of platinum that plunged to a low not seen since 2003 on 21 January. 

Lonmin is struggling to survive. Even after raising hundreds of millions from shareholders at the end of last year, the company’s finances are still in poor shape. Now it faces an uphill struggle to return to profit and with platinum prices showing no signs of staging a recovery any time soon, Lonmin’s recovery task is getting harder by the day. 

City analysts expect the company to report losses for the next two years, adding to its losing streak. Since 2010, Lonmin has reported losses of $1.71bn and further losses of $60m are expected during the next two years. 

All in all, Lonmin might look cheap, but the company is haemorrhaging cash and should be avoided.  

Struggling 

Like Lonmin, Royal Bank of Scotland (LSE: RBS) is also struggling to regain investor confidence after years of heavy losses. On Wednesday, the bank warned of yet more heavy losses, £4.1bn in fact. As a result, next month it’s set to report its eighth successive annual loss.

That said, RBS’s underlying figures, excluding one-offs, look to be improving. According to analysts, RBS’s tier one equity capital ratio is above its targeted 13% and the bank’s net asset value per share stands at 447p, 44% above current levels. Excluding charges, analysts expect RBS to report earnings per share of 24.7p for 2015 and 22.4p for 2016.

If you’re willing to take the risk, RBS might be an interesting value play. 

A safe dividend 

Shares in G4S (LSE: GFS) plunged to a 52-week low this week capping off a rough 12 months for the company’s shareholders. Indeed, since the end of January last year, the company’s shares have underperformed the FTSE 100 by 10%. 

Unfortunately, even after these declines, shares in G4S don’t look attractive at current levels. The shares are trading at a forward P/E of 14.5 for 2016 and analysts expect earnings per share to grow by 10% for the year. 

However, analysts at investment bank Société Générale believe that G4S could be one of the best dividend stocks in the UK market. G4S’s shares support a dividend yield of 4.2%, and the payout is covered 1.5 times by earnings per share. Moreover, the company has £500m of cash on its balance sheet, and while debt may be high at 47% of assets, my figures indicate that G4S’s interest bill is covered two-and-a-half times by earnings before interest and tax. 

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.