Ask five investors to define a value stock, and you’ll get five different answers. Some like to use the price-to-earnings ratio, others prefer stocks that trade at a low price in relation to book value, while others deploy complex multi-variable models to find deeply hidden bargain stocks.

To my mind, the best approach lies in free cash flow, which is operating cash flow minus capital expenditures. It’s the only tried and true way to know that a company is generating the cash to buy back stock, pay dividends, reduce debt or make acquisitions.

Looking at companies in the S&P 500, the average stock is valued at around 25 times trailing free cash flow. Said another way, such a value suggests a 4% free cash flow yield (100/25=4). If you can find good companies with a free cash flow yield in excess of 6%, then you are looking at a certifiable bargain.

If you are in search of S&P 500 stock with a free cash flow yield in excess of 10%, then you have just three choices.

While natural gas distributor AGL Resources, Inc. (NYSE: GAS) holds clear appeal, I remain especially enamored of insurance stocks in general, and these two insurers in particular. They both sport clear value now and possess solid growth prospects down the road.

There is much to like about Prudential Financial, Inc. (NYSE: PRU). The insurer is well diversified with solid market share in asset management, annuities, employee group insurance, retirement management services and life insurance. Moreover, the company is steadily pursuing an international expansion (foreign operations now account for 43% of revenue).

Yet in some respects, this is not a deep value stock. It is valued at 1.6 times book value, which is at the higher end of the peer group. And the 2.7% dividend yield is middling.

Value investors should instead set their sights on Genworth Financial, Inc. (NYSE: GNW). Although the insurer, which was the insurance arm of GE Capital until 2004, doesn’t pay a dividend as it is still re-building a capital base that was depleted during the economic downturn.

#-ad_banner-#To be sure, after a series of asset write-downs and robust cash flow, Genworth’s balance sheet is now much cleaner. That’s because the company has boosted cash by around $1.8 billion in the past four years (to $4.9 billion), while also retiring roughly $2 billion in debt.

To be sure, this stock still suffers from a legacy of bad managerial decisions made back during the financial crisis and afterwards. A key division focused on long-term care insurance continues to generate poor results. And management now acknowledges that the company’s results throughout 2014 were simply too messy for investors to stomach, and several divisions saw profit margins recede. In response, activist investors such as John Paulson have been pushing for major changes, and it looks as if their efforts will soon succeed.

Noting that shares trade at a big discount to intrinsic value (tangible book value exceeds $20 a share, while shares trade for less than $8), management has begun contemplating a break-up of the company, or a going private transaction. The company has already begun to unload some of its stake in an Australian mortgage subsidiary.

With regards to the company’s domestic life insurance and annuity business, “we have engaged external strategic and financial advisors to help us asses our strategy and the various strategic options we might pursue,” said CEO Tom McInerney on a recent conference call.

Before regulators will allow any asset sales, Genworth’s management needed to prove that business trends have stabilized in each operating segment. “The company did just that in 1Q15, combining an earnings beat with progress in achieving crucial premium increase approvals from state regulators on a portion of its troubled long-term care (LTC) exposures,” notes BTIG’s Mark Palmer. He thinks asset sales will begin to close the steep discount to tangible book value, and his $15 price target represents nearly 100% upside.

Risks To Consider: Both of these insurers continue to be in the crosshairs of regulators who want to sure that capital bases are sufficiently robust to withstand another sharp economic downturn.

Action To Take –> Even applying a traditional P/E ratio reveals Genworth to be among the most inexpensive stocks in the S&P 500. Shares trade for around 7.5 times projected 2015 profits, which is roughly half of the broader market multiple. A series of asset sales, or perhaps even bolder action should help close the current deeply discounted valuation. Such a move might come at any time, so investors don’t want to wait too long in assessing the prospects for this stock.

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