The legendary manager of Fidelity’s Magellan fund (1977 to 1990) and author of One Up on Wall Street subscribed to the investment philosophy of buying into companies you could understand and then analyzing their fundamentals. One of Lynch’s go-to metrics was the PEG ratio (an indicator of value), which measured the relationship between a stock’s price-earnings ratio and its earnings-per-share growth. In a recent article for TheStreet, Validea CEO John Reese explained his Lynch-based stock screening model and identified some picks that make the grade:

• Waddell & Reed Financial (WDR) is a mutual fund and asset-management company that earns high marks not only for its strong PEG ratio, but also based on a solid dividend yield, healthy liquidity and modest debt level.
• Scholastic (SCHL) publishes and distributes children’s books and provides print and digital instructional materials. The company’s low leverage and price-sales ratio make the stock attractive.
• Amtrust Financial Services (AFSI) scores well using a few of our guru-based investment models based on its PEG ratio as well as solid return-on-assets, revenue growth and earnings predictability.
• BOFI (BOFI) is a diversified financial services company that earns a thumbs-up given its high-scoring PEG ratio as well as its total equity-to-assets and return-on-assets.