Over the last year or so artificial intelligence has dominated the stock market. Excitement around the emergence of artificial intelligence and machine learning has made it even more difficult for underappreciated and undervalued stocks to shine.
Yet everyone loves a bargain, which is one of the primary reasons investors will always hunt for undervalued companies. There are few better feelings than watching the underappreciated suddenly become appreciated. That’s as true in the stock market as it is in all of life. Anyway, allow me to descend from my soapbox.
The point here is that these stocks can quickly move upward as sentiment shifts. The companies discussed below represent emerging industries and firms that were affected by the pandemic. Let’s take a look at these maligned stocks that are ready to rise again.
Archer Aviation (ACHR)
Let’s be clear here: it’s very difficult to rationally assert that Archer Aviation (NYSE:ACHR) stock is undervalued based on any traditional metric.
The company has a long road ahead of it before it can bring the electric vertical takeoff and landing (eVTOL) market to fruition. Archer is currently in the final stage of flight certification and expects to launch in 2025. The company is also trying to bring flying electric vehicles to the mainstream, which is an expensive endeavor. That brings me back to the point that Archer Aviation isn’t undervalued by traditional metrics.
In fact, the company’s return on invested capital sits at negative 710%. Give the company a dollar and it will turn it into a $6.10 loss. That isn’t the only weak metric but it is a common story across upstart companies: it takes a lot of money to create revolutionary technology.
Anyway, Archer Aviation is undervalued according to Wall Street. Shares trade for $5 now and have a consensus price of $9.60. The low target price is $8. That suggests that current market sentiment is overly negative and from that perspective ACHR shares are undervalued.
Albemarle (ALB)
Albemarle (NYSE:ALB) is a stock, unlike ACHR, that does fit the traditional mold of an undervalued stock.
The world’s largest lithium producer suffers from a price-to-earnings (P/E) ratio of 9.36. That P/E ratio makes it cheaper than 86% of competitors in the chemicals industry.
There’s a lot to unpack there but it essentially all relates to the collapse of lithium prices. That collapse was precipitated by weakening demand in China and other economic concerns in the world’s largest EV market. That issue has played out over the past year and is reflected in Albemarle’s earnings.
For example, Albemarle’s loss per share in Q4 was $5.26. Yet, over the last 12 months, its EPS was $13.34. It’s a perfect representation of how quickly things can change in commodities markets and what the financial results look like.
Anyway, very few investors believe that Albemarle is at risk over the long term. 2024 will be volatile but ALB shares are bound to rebound. The results will be a rapid increase in P/E ratio as investors pile back in to get their piece of the Albemarle pie.
Delta Air Lines (DAL)
One of the reasons Delta Air Lines (NYSE:DAL) stock continues to be undervalued is simply that the company is shaking off pandemic woes. The company took on a lot of debt while its fleet sat stagnant during the depths of Covid-19.
Frankly, debt is something that continues to plague the company. Net debt currently sits at $21.4 billion down $879 million from the end of 2022. It certainly isn’t all bad news by any means. Delta’s net income more than tripled in 2023, reaching $4.61 billion.
Yet, investors have largely avoided Delta Airlines and its stock. The result is a very low P/E ratio of 6.43, which is roughly 50% below its 10-year median. That’s a decent reason to consider investing in Delta Airlines at the moment.
If that doesn’t convince you then also consider that Bridgewater Associates recently increased its holding by more than 529,000 shares.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
