Investors who earn more than the market are usually those who invest in stocks that are healthy and cheap. This is a smart strategy to buy low and sell high. Investing in undervalued stocks has been one of the most common practice to outperform the market. An undervalued stock has a lower market value than its intrinsic value, which makes it a great investment. Intrinsic value is usually calculated by identifying the stock’s cash flows, assets and liabilities. Investors can buy an undervalued stock and sell high when the market realized its value of stock as price rises.
Looking for stocks that are both cheap and stable is not difficult. As an investor, if you keep an eye on the market, with some basic research you can earn huge profits from these undervalued stocks. The few basic steps to find undervalued stocks are:
Lower Price Earnings Ratio (P/E)
Price Earnings ratio is the first ratio to evaluate a stock’s value. This ratio compares the market price of a stock with the company’s earnings. For example, if the P/E ratio of a company is 15 and all the competing companies have a higher P/E ratio then this is a potential stock to watch out.
Lower Price Earnings Growth Ratio (PEG)
The PEG ratio further confirms the value of a stock. Dividing the P/E ratio by the earnings growth rate gives you the PEG ratio. For example, if the PE ratio is 15 and earnings growth rate is 20% then divide 15 by 20 you will get you will get 0.75. The lower this PEG ratio the better the opportunity to invest in.
High Dividend Yield
If a company’s dividend payment rate exceeds that of its competitors, this may indicate the stock is undervalued. For example, if the company’s dividend yield is 3% and the industry’s dividend yield is 2% than it is a high dividend yield and makes this company’s stock an undervalued stock.
Low Market to Book Ratio
Market to Book ratio is calculated by dividing the share price of the stock with the book value. The higher the Market to Book ratio the more inflated is its market price. Hence a lower Market to book ratio means higher potential for future growth
Even though there is no guarantee of the way the financial market moves, the above ratio gave a fairly good idea about undervalued stocks to invest in. Keeping in mind these above ratios we have compiled a list of ‘Best Undervalued Stocks’ below which will guide you in the best possible way:
List of Best Undervalued Stocks
|Name||Price Earnings Ratio||Price Earnings Growth Ratio (5 year expected)||Dividend Yield||Market to Book Ratio|
|Bank of America||17.18||0.54||1.86%||1.38|
|Simon Property Group||27.48||2.91||3.25%||14|
Alibaba is a massive international business, connecting businesses-to-consumers, businesses-to-businesses, and even consumers-to-consumers. Alibaba.com is the leading platform for global wholesale trade. Alibaba is booming. Revenues have more than doubled within the last two years. The stock of Alibaba is also on a continuous rising streak.
Also, the company reports a very high forward PEG ratio which is an excellent indicator of higher future earnings and a higher market price. The company also has a low market-to-book ratio which means that the current market price is highly understated.
These numbers indicate that Alibaba is one of the Best undervalued stocks to buy now.
2. Bank of America
Bank of America is one of the world’s leading financial institutions, serving individual consumers, small and middle-market businesses, and large corporations with a full range of banking, investing, asset management, and other financial and risk management products and services. Bank of America offers industry-leading support to approximately 3 million small business owners through a suite of innovative, easy-to-use online products and services.
Despite a comparatively higher PE ratio than the industry average, the PE of Bank of America is low as compared to its competitors which means greater upside potential for the future. Moreover, the Market book value is also low which indicates a higher future price of the company’s stock. The bank’s forwards PEG is low but it also has a comparatively higher PE ratio which suggests that the company’s stock is undervalued.
Looking at the above stats, Bank of America is one of the best-undervalued stocks to buy in 2022.
3. Verizon Communication
Verizon is one of the largest communication technology companies in the world. It is the world’s leading provider of technology, communications, information, and entertainment products, and services. The tech company reported $128 Billion in revenues in 2020 and has also been ranked amongst the top 20 companies on the Fortune 500 list.
The company’s forward PEG ratio is also higher indicating higher future earnings. The market to book ratio is also lower which means greater potential for the company’s stock to rise in the future. Also, the company’s dividend yield is higher than the major companies in the industries again indicating the stock of Verizon is undervalued.
Verizon Communication is a company with greater upside potential in the future. A wise strategy would be to buy today at $56.07 and sell at a higher price in the future.
With nearly 2,800 stores in 35 states of the U.S., under two dozen banners, and annual sales of more than $121.1 billion, Kroger today ranks as one of the world’s largest retailers.
The supermarket chain has a good forward PEG ratio indicating higher future earnings. Moreover, the company’s market to book ratio is also lower meaning the stock is highly understated and has great potential to rise in the future.
Currently trading at $38, Kroger is on a bullish journey for the past 2 years. The company has great upside potential as indicated by the above-mentioned stats. As an investor, you should buy this undervalued stock now. We have also compiled a list of the Best NFT Stocks for 2022 that can earn you great returns if you invest in them today.
Tennant Company is a recognized leader in the cleaning industry. Its stock performance has been considered good after the sharp decline in March,202 due to COVID-19. Tennant Company might not be a large-cap stock, but it saw significant share price movement during recent months on the stock exchange. The stock has been on a bullish journey for over a year.
The company has a good forward PEG ratio, indicating revenue growth in the future. The market-to-book ratio of the cleaning company is also low which means the company’s stock is highly undervalued now.
Currently trading at $79.83, Tennant company stock is a good buy. Its intrinsic value is higher than the current market price and is on the list of undervalued stocks of 2022.
6. Upland Software
Upland Software Inc provides cloud-based enterprise work management software. The Company offers software applications that enable organizations to plan, manage and execute projects and work. The company has big clients Pepsico, Western Union, and GE Healthcare amongst its list of 10,000 clients.
This indicates a great upside potential. Moreover, the forward PEG ratio indicated higher future earnings. The company’s market book value is also considerably lower, which indicates the stock is highly undervalued and has great potential to rise in the future.
The stock of Upland software is on a bumpy ride with lots of trenches and peaks in the past 2 years. But even then it has been maintaining its growth. The stock is currently undervalued and investors seeking long-term profitable opportunities should invest in this undervalued stock in 2022.
Norton with LifeLock offers security for the digital world — by protecting PCs and Macs, mobile devices, privacy, and Internet-connected home network. NortonLifeLock is a Fortune 500 company that provides cybersecurity software and services
The company’s PEG ratio is also lower indicating the stock is greatly undervalued. As per Nasdaq’s research reports, the value of NortonLifelock is 24% undervalued based on the discounted cash flow method. The company’s dividend yield is also higher, comparatively.
NortonLifelock’s stock has been trading at a low price since COVID-19 and has recently recovered to the pre-covid-19 status. It is a wise choice to invest in the NLOK stock currently trading at $27.66 for the long term. This undervalued stock will provide greater opportunities for profit in the future.
8. Tyson Foods
Tyson Foods is a modern, multi-national, protein-focused food company producing approximately 20% of the beef, pork, and chicken in the United States. The company engages in the production of processed food. It is a Fortune 500 company and was ranked 109 in America’s Largest Public Companies 2018.
Tyson Foods has a trailing-twelve-months P/E of 11.19 compared to the Food – Meat Products industry’s P/E of 11.68. It has a good REG ratio, indicating higher future earnings. Moreover, it has a higher dividend yield as compared to the industry’s average dividend. Also, the market-to-book ratio is considerably low which means the stock is highly undervalued and holds great potential for future growth.
The stock of Tyson Foods was highly affected by Covid-19 but it has also recovered itself slowly and steadily. The company’s stock has been on a bullish trend since the sharp decline in March 2020. Also, the above stats indicate the stock is highly undervalued and has great future potential. Tyson food is one of the best-undervalued stocks to buy in 2022.
9. Merck & Co.
Merck & Co Inc is one of the world’s leading pharmaceutical health care companies, headquartered in New Jersey. As is typical for pharmaceutical firms, their principal business is medicines, biologics, vaccines, and consumer and animal products.
The pharma company’s forward PEG ratio also indicates higher future earnings, Moreover, the company Market to book ratio is slightly higher but compared to the industry figures it indicates a higher intrinsic value. The stock is booming and the best time to take advantage of this undervalued stock is to buy today.
Currently trading at $77.99, the stock of Merck and Co has great upside potential. The stock has been continuously rising and dropping in the past 2 years and is expected to reach new higher levels. The best strategy would be to buy this stock today and sell at a higher price in the future.
Checkout the best value stocks to invest in now.
10. Twilio (NYSE: TWLO)
Twilio offers a platform for software developers where they can programmatically make and receive phone calls, send and receive text messages, and perform other communication functions using its web service APIs. Twilio offers the below services to developers to aid in creating the perfect unified communications system:
- Contact Centre
- Marketing Campaigns
Twilio has a market capitalization of $50.6 billion. Its share is currently trading at $284. Currently, Twilio is not generating profits. It has a Price Earnings Growth Ratio of 28.31% is also less than one which further indicates the stock is undervalued. Moreover, its market-to-book ratio is also very low, which is another sign of the stock being undervalued.
Twilio’s stock has shown remarkable performance since 2020. It has risen by more than 100% from the start of 2020. Even though the company is not generating profits, the growth prospects of the company are extremely high. The revenue increases by 65% as reported in the recent quarterly report.
11. American Express (NYSE: AXP)
American Express is a global services company, specializing in card payment services. American Express is the only company with a strong, global presence across the entire payments chain. They are the world’s largest card issuer, the premium network for high-spending cardmembers, a processor of millions of transactions daily, and a partner that provides business-building services to a worldwide merchant base.
The car payment company’s PE ratio and less than 1 PEG ratio indicate that the stock is undervalued. Moreover, the low Market book ratio further confirms this analysis. The market capitalization of the company is $122 billion. The share of American Express is currently trading at $157.
The company’s excellent financials represent are the result of accelerating momentum in its core business and outstanding credit performance, enabled by strategic decisions. Revenues have shot by 25% in the recent quarter as compared to the same time last year. Undoubtedly, the rebound of the travel and entertainment industry coupled with consumers’ increased spending on dine-out has fueled the increase in revenue.
12. Boeing (BA)
Boeing is among the largest global aerospace manufacturer and is one of the third-largest defense contractors in the world. The company operates through four segments: Commercial Airplanes; Defense, Space & Security; Global Services; and Boeing Capital
Boeing has a market cap of $117 billion. Its share is trading at a price of $199. The company’s stock is growing steadily and is near its pre-pandemic levels. Boeing is the leading name in the aerospace industry. Moreover, due to the high cost of business, the threat of new competitors is very low. This gives Boeing a huge advantage in the industry. In addition to it, being a defense aircraft manufacturer and supplier is the strongest and one of the highest revenue-generating segments of the company.
The low-price earnings growth ratio indicates the stock of Boeing is currently undervalued. Being a leading name in the aerospace industry, the company faced a huge blow due to the travel ban. Ever since the travel ban has been lifted, the company is recovering fast. In its recent quarter, Boeing reported an 8% increase in revenue, and the net loss is gradually declining with time.
13. ChargePoint (CHPT)
ChargePoint is the leading EV charging network, with the best technology. ChargePoint has developed a fully integrated portfolio of hardware, cloud services, and support with the best technology in the industry.
ChargePoint is valued at $8.4. Its stock is currently trading at $25.8.8. The stock of ChargePoint has risen alongside the rise in the EV sector. A year ago, the stock of ChargePoint was trading around $10. Today it is trading at 2.5x the price. Moreover, with the expected surge in the electric vehicle industry, ChargePoint’s stock will also receive a huge boost.
The excellent financial performance of ChargePoint demonstrates growth and leadership in the electric revolution. Moreover, the EV charging company achieved record revenue and has been able to significantly grow its commercial, fleet, and residential businesses. As per the recent quarterly report, the company’s revenue increased by 61% year on year. Moreover, the recent integration with Mercedes along with a couple of more progressive agreements will give a huge push towards growth. At the current market price, ChargePoint is very cheap and is a gem that will soon rise high.
14. Simon Property Group (SPG)
Simon Property Group, Inc. is an American real estate investment trust that invests in shopping malls, outlet centers, and community/ lifestyle centers. Simon is a global leader in the ownership of premier shopping, dining, entertainment, and mixed-use destinations.
Simon Property Group has a very successful strategy in place for long-term growth: they focus on owning high-quality real estate, lead the industry in successful and profitable acquisitions, and enhance the shopping experience through innovation and investment in “Mall of The Future”.
Simon has a market valuation of $52 billion. Its stock is currently trading at $160. A low PEG ratio indicates the stock is undervalued. The revenue in the recent quarter increased by 22%, as compared to the same period last year. The stock of the company is on an upward streak since the last quarter of 2020. The stock entered the year 2021 at a price of approx. $86. In less than a year, the stock has almost doubled. With the economy on the path to recovery, Simon’s business is flourishing. It is a great stock with excellent growth in the near future.
The above list of companies has been carefully selected keeping in mind what the statistics indicate. The majority of the above companies are low-cap companies that have great potential for future growth. As a long-term investment, buying these undervalued stocks today will yield multi-fold profits in the future.
The one downside of investing in undervalues stocks is that investors must wait a long period of time for their portfolio to become profitable. One way to make this waiting period worthwhile is to pick those undervalued stock which are paying high dividends. Investors can enjoy dividends while they wat for their portfolio to expand.
The above list of Undervalued Stocks will help you choose wisely and create a profitable investment portfolio.
Disclaimer: None of the information published in this article should be construed as investment advice. Article is based on author’s independent research, we strongly advise our readers to always do their due diligence before investing.
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