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Are these 3 stocks looking cheap today?

When I look at a company, I am interested in the past earnings and performance. It helps to understand what the range of results have been and what may be expected in the future. If there is a down year, that usually can’t be avoided, but it shows you how quickly the company can react to it and snap back into business.

If short-term situations bring the share price of a good company down, then it may be better to see it as a discount sale.  Knowing the stock’s story and growth plans gives you that perspective.

These companies are increasing earnings and maintaining growth trends, so they may give your portfolio a lift in returns.

Flexigroup Limited (ASX: FXL), the leasing and vendor finance service provider, had a strong first-half result and expects its full year net profit to be up 17%-19% on FY2013. Despite that, the market has sold down the stock since November and its PE is 12.8.

The company recently acquired the Australian and New Zealand business of ThinkSmart Limited (ASX: TSM). It operates the Rentsmart vendor finance service that allows customers to borrow for individual purchases of furniture and household goods.

Rentsmart was a competitor to its Flexirent service. Owning it will give it access to customers of more major retailers and should help grow its business further.

Rio Tinto Limited (ASX: RIO) raised its full year underlying net profit by 10% and even gave shareholders an extra bonus by increasing the full year dividend 15% over the previous year.

Although the talk over the past year has been about the mining pullback that chilled the market, the company focused on raising production and shipping out more iron ore at higher prices. That will keep it in the black.

Its 8.8 PE is still towards the low end of its historical average PE range. While the market concern about coal mining remains, it will just keeping pumping out more iron ore.

Asciano Limited (ASX: AIO), the rail freight transporter and cargo port operator, had a decent 6% rise in underlying net profit thanks to new contracts, acquisitions and cost cutting measures that yielded about $21.8 million in savings.

Since 2009, both revenue and net profit have risen steadily, so there is a good upward trend in place. It plans to expand into the Queensland market more and has picked up a new haulage contract with coal miner Whitehaven Coal Limited (ASX: WHC). Although the coal mining industry is down, overall production is expected to rise, so larger volumes will need to be shipped to port by rail.

Foolish takeaway

Focusing on a company’s earnings growth and the catalysts for change is a better way to understand value rather than the share price. The market’s focus is on shorter-term developments, so use that to your advantage.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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