In the latest issue of Benjamin Shepherd’s Wall Street, I wrote a column for “Street Smart” describing how to construct a basic stock screen to use as an idea generation tool for value stock selection. As a complement to that article, we’re publishing an example of a basic screen constructed in accordance with the fundamental criteria that I detailed in my article. We’re also publishing the partial listing of the stocks that resulted from that screen. Additionally, I’ve provided my analysis below of two value stocks that populated those results.

Last month, I used Google Finance’s free stock screener to perform my screen on growth stocks. This month, however, I opted to use Morningstar’s “Premium Stock Screener” to construct the value stock screen. Access to this screener is included along with a paid subscription to Morningstar’s “Premium” service.

Here is what the screener should look like after you’ve input the fundamental criteria that I specified in my article:

Source: Morningstar

As I noted in my article, screening for value stocks is just the first step of the stock selection process. Additional research is necessary to determine that a stock is not a value trap, and has an actual catalyst for a turnaround.

Indeed, many of the companies in the partial listing below operate in deeply out-of-favor industries and don’t have any clearly identifiable catalysts for improvement short of a strong economic recovery.

Source: Morningstar

The Companies

Checkpoint Systems (NYSE: CKP) operates in three areas geared toward retailers: shrink management, inventory management, and apparel labeling.

Checkpoint’s shrink management division is its largest operating segment, generally accounting for about two-thirds of the firm’s revenue. The division offers video monitoring, security systems and fire alarm systems, as well as electronic article surveillance systems. Additionally, Checkpoint offers software systems that help retailers determine when their inventories are at the highest risk for theft.

The firms labeling segment–which generates about 20 percent of revenue–offers a wide array of products, ranging from the woven labels sewn inside garments to printed labels that convey price, size and retailer information.

Checkpoint’s inventory management division produces roughly 10 percent of annual sales. This segment is responsible for the firm’s radio-frequency identification (RFID) products, which are tiny transmitters embedded into tags that are then integrated with security systems. The tags also communicate with inventory tracking systems, which simplifies inventory management by providing retailers with real-time information, including data on which items are selling briskly.

There are currently six analysts covering the stock: two analysts rate the company a “buy,” three rate it a “hold” and one recommends selling. Their average target price is a fairly ambitious $17.

I don’t see anything operationally deficient with the company, but I think it’s in the wrong business at the wrong time.

Given the general weakness in the retail sector, demand for Checkpoint’s shrink management systems will be relatively weak. Such systems are typically installed when a store is first opened and the trend right now is toward store closures. Furthermore, the firm produces about 40 percent of its revenue in Europe, and there could be a mild recession in the eurozone later this year.

Despite these challenges, Checkpoint has maintained positive earnings, with earnings per share (EPS) of 69 cents last year and probably about 40 cents for full-year 2011.

From a valuation perspective, Checkpoint is currently in the bargain basement. The firm’s stock trades at 0.5 times sales and a price-to-book (PB) ratio of just 0.8. The company also has very little debt. Those fundamentals have attracted a lot of new institutional buyers, but institutions and mutual funds remain net sellers overall.

While Checkpoint has an attractive valuation, investors should put it on a watch list until the economy improves.

Computer Sciences Corp (NYSE: CSC) is one of the world’s largest technology consultancies, trailing only IBM Corp (NYSE: IBM) and Accenture (NYSE: ACN) in terms of revenue.

In the past, the firm has been one of the market’s favorite names in the sector, particularly since about 40 percent of its revenue is generated through contracts with the federal government, with defense and intelligence agencies being among its largest clients. Those budgets have traditionally been spared from cuts, so those contracts were seen as a major plus for the company.

But in the wake of the financial crisis, politicians are feeling pressured by the electorate to pare budgets and rein in spending. In particular, the Department of Defense faces extensive budget cuts now that US military operations are winding down in the Middle East. As such, investors are concerned about how these shifts in spending will affect Computer Sciences Corp.

Additionally, the company faces other challenges. Computer Sciences Corp is the subject of an informal Securities and Exchange Commission (SEC) investigation. The firm also may have to take a $1.5 billion write-down on a project it was developing for the UK’s National Health Service (NHS).

As a result of these difficulties, the company suffered a substantial $18.56 EPS loss during last year’s second quarter. And the firm’s formerly huge cash hoard has eroded from $2.6 billion a year ago to just under $1 billion in the most recent quarter. Credit default swap contracts on the company–which are essentially insurance policies against bankruptcy–reached record highs in the first week of January 2012, as investors became extremely nervous about Computer Sciences Corp’s prospects.

These numerous problems are reflected in the firm’s valuation metrics. Its PB ratio is just 0.8 and its trailing twelve-month price-to-sales ratio is just 0.2. But the firm remains financially strong, with a debt-to-equity ratio of 0.5 and a current ratio of 1.6.

Unfortunately, there’s no saving grace to be found in the massive write-down the firm is poised to take on the NHS project, which was disastrous from the beginning. The project was intended to create a single platform where UK doctors could access the entirety of a patient’s medical history. The project had been underway for the better part of a decade, but the firm failed to hit many of its milestones for the project’s development.

The project’s failure largely stems from the fact that the British government’s funding failed to match its ambitious scale. On the other hand, some investors argue that Computer Sciences Corp was irresponsible in taking on the project in the first place. The firm underbid on the contract and overestimated its ability to execute on it in a timely manner.

However, the firm’s contracts with the US federal government are the one factor which should ultimately work in its favor. Although federal spending will likely be slashed, particularly in the defense arena, Computer Sciences Corp could be relatively unscathed because of the increasing role technology plays in US force projection. Additionally, the portion of its revenue tied to intelligence gathering is unlikely to be impacted because a smaller military will be far more dependent upon accurate and timely intelligence.

Computer Sciences Corp is also making headway in developing its offshoring capabilities, which will help the firm compete on cost against its peers.