Not every investor wants to buy index funds and ETFs. Some individuals prefer to search for undervalued growth stocks that can generate meaningful long-term returns. While growth stocks often come with lofty valuations and expectations, some of these investments trade at reasonable prices.
It’s not every day when you find a stock that is growing its revenue, expanding its profit margins and is priced to perfection. These are some of the most undervalued growth stocks that you may want to keep on your radar.
Meta Platforms (META)
Meta Platform (NASDAQ:META) is arguably the most undervalued Magnificent Seven stock right now. It has a 26 P/E ratio, thanks to a post-earnings pullback. The stock is down by more than 10% from its peak, and the company looks poised to regain all of its losses.
The social media giant reported 27% year-over-year (YOY) revenue growth in Q1 2024. Meanwhile, net income more than doubled to reach $12.4 billion. This metric was up by 117% YOY. This isn’t the type of earnings report that justifies a sharp drop.
Meta Platforms anticipates Q2 of 2024 revenue will range from $36.5 billion to $39.0 billion. The company generated $32.0 billion in Q2 of 2023 revenue. Therefore, guidance implies net sales growth ranging from 14.1% to 21.9%. While the lower end of guidance suggests notable deceleration, the high end of guidance is still respectable. Meta Platforms still looks poised to deliver higher profit margins during the upcoming quarter.
The recent drop looks like an overreaction. Patient long-term investors can capitalize on the opportunity.
Oracle (ORCL)
Oracle (NYSE:ORCL) is a reasonably priced cloud computing stock that trades at a 31 P/E ratio. The stock is up by 11% year-to-date (YTD) and has more than doubled over the past five years. Also, Oracle sells many hardware and software products.
The product mix resulted in 7% YOY revenue growth in Q3 FY24. Sales should continue to grow based on the company’s 29% YOY growth in remaining performance obligations.
Oracle’s cloud segment is exhibiting the most growth. Cloud Infrastructure revenue grew by 49% YOY to reach $1.8 billion. Cloud Application revenue inched 14% higher YOY to reach $3.3 billion. And, total cloud revenue made up 38.3% of the company’s total revenue.
In addition, the cloud giant offers an enticing 1.38% dividend yield and a good history of dividend hikes. Oracle’s annualized dividend growth rate is 14.31% over the past decade. Dividend growth has accelerated in recent quarters. The 3-year annualized growth rate is 18.56%.
American Express (AXP)
American Express (NYSE:AXP) trades at a 19 P/E ratio while posting impressive financial growth. Revenue was up by 11% YOY in Q1 2024 while net income soared by 34% year-over-year.
The financial firm should exhibit more demand moving forward. More than 60% of its new cardholders added in the quarter were Millennials or Gen Z consumers. Investors have noticed. Its stock is up by 23% YTD and has rallied by 95% over the past five years.
Moreover, American Express trades at a valuation much lower than other credit and debit card giants. As AXP continues to expand its profit margins, it should eventually command a P/E ratio similar to that of its peers, which is above 30. That level of valuation expansion points to more gains. And that doesn’t even include the company’s long-term financial strength.
Finally, the credit and debit card issuer has a 1.21% dividend yield and recently hiked its dividend by 17%.
On the date of publication, Marc Guberti 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.
