While it’s comforting to pick the ideas that the masses have selected under the theory of safety in numbers, adventurous investors may want to consider undervalued rebound stocks. Beaten down based on their valuations against key financial metrics, these ideas have been largely abandoned by the market.
However, ignoring these ideas may be a mistake. Yes, focusing merely on underappreciated ideas presents higher risks. They’re away from the spotlight for a reason. At the same time, finding a hidden gem can yield tremendous returns. With that in mind, below are undervalued rebound stocks to consider.
Shoe Carnival (SCVL)
Falling under the consumer discretionary sector, Shoe Carnival (NASDAQ:SCVL) – as you might imagine – operates in the apparel retail segment. With its subsidiaries, the company functions as a family footwear retailer focused on the domestic market. It offers a range of dress, casual, work and athletic shoes. These include sandals and boots for men, women and children.
At first glance, the ambiguous narrative of the consumer economy may have you turned off from the SCVL stock. However, according to a recent Reuters report, U.S. consumer confidence has recovered (though inflation concerns remain). That might mean that those who are gainfully employed – which is a plentiful figure – may be in the mood for discretionary purchases. That’s a positive for Shoe Carnival.
Yes, SCVL is undervalued, trading at a trailing-year earnings multiple of 13.79X. That’s lower than the sector median 18.17X. However, if analysts’ projections are anything to go by, following a modest year in 2024, 2025 earnings could hit $3.12 per share. If so, that would imply 16.13% growth from projected 2024 earnings. Thus, SCVL ranks among the undervalued rebound stocks to consider.
Air Lease (AL)
Founded in 2010, Air Lease (NYSE:AL) operates in the rental and leasing services category. As its name suggests, Air Lease engages in the purchasing and leasing of commercial jet aircraft to airlines worldwide. Specifically, it sells aircraft from its fleet to third parties. These entities may include other leasing firms, financial service enterprise, airlines and other investors.
Right now, AL stock trades at 9.39X trailing-year earnings. That’s significantly lower than the business service category’s median multiple of 17.84X. However, prospective speculators might not want to ignore this dynamic. Yes, the trouble is that analysts are projecting earnings per share of $4.44 at the end of this fiscal year. That would come out to a nearly 14% erosion.
Here’s the thing. By fiscal 2025, EPS could rise to $5.32, implying 20% upside. In 2026, this metric could improve again to $5.76 per share. Throughout this period, revenue may steadily increase, from 2023’s haul of $2.68 billion to $3.35 billion by 2026 end. Therefore, AL should be on your list of undervalued rebound stocks to consider.
Tapestry (TPR)
Founded in 1941, Tapestry (NYSE:TPR) falls under the luxury goods segment. Per its public profile, the company provides luxury accessories and branded lifestyle products in the U.S., Japan, Greater China and other international markets. It operates in three segments: Coach, Kate Spade and Stuart Weitzman. Thanks to its world-renowned brands, Tapestry could potentially rise above the muck.
Yes, the consumer economy and its vagaries represent a major risk for luxury goods. However, those who are well off have been doing well in this environment. With that in mind, TPR stock trades at a trailing-year earnings multiple of 10.98X, as well as 8.3X forward earnings. Both stats are well below the underlying cyclical retail sector.
But TPR one of the undervalued rebound stocks or merely a value trap? For the next three years, EPS could rise from last year’s $3.88 to $4.86. On the top line, revenue could improve from 2023’s tally of $6.66 billion to $7.13 billion.
We’re not talking about blistering business expansion. Still, with a dividend yield of 3.37% (and a low payout ratio of 37.04%), TPR is well worth considering.
Chord Energy (CHRD)
Based in Houston, Texas, Chord Energy (NASDAQ:CHRD) falls under the oil and gas exploration and production (upstream) component of the energy value chain. Per its corporate profile, Chord operates as an independent explorer and producer. Its main products extracted are crude oil, natural gas and natural gas liquids (NGLs). As for location, Chord primarily focuses on the Williston Basin.
On paper, CHRD stock is easily undervalued, trading at 8.4X trailing-year earnings. Notably, the sector median comes in with an 11.6X multiple. Here, I’m not worried about Chord being viewed as a value trap. With geopolitical flashpoints raging around the world, fears of supply chain disruptions ring loudly. If something were to happen, that might cynically boost CHRD.
By the end of the fiscal year, analysts are looking for EPS of $22.22 on revenue of $4.85 billion. To be fair, that’s a bit off from last year’s print of $23.51 per share. However, unanticipated rumblings like we’ve seen recently in the oil market could lift the company’s earnings potential. Therefore, the high-side target of $24.08 isn’t out of the question.
If so, that would make CHRD one of the undervalued rebound stocks to consider.
Matador Resources (MTDR)
Headquartered in Dallas, Texas, Matador Resources (NYSE:MTDR) is another player in the upstream component of the hydrocarbon value chain. It too operates as an independent energy firm. It engages in the exploration, development, production and acquisition of oil and natural gas resources in the U.S. Notably, Matador also owns a midstream business unit, adding a touch more relevance to the offering.
As with the other undervalued rebound stocks, MTDR plays the underappreciated role on paper. Right now, it runs a trailing-year earnings multiple of 8.45X and a forward multiple of 7.51X. Both stats are significantly below their sector median values. At first glance, that might yield concerns about a value trap. However, the consensus financial projections might put those anxieties aside.
By the end of the fiscal year, EPS could hit $7.75 on revenue of $3.45 billion. If so, that would imply almost 10% expansion in the bottom line and nearly 23% growth in the top. It could get better due to the cynical backdrop. EPS could potentially rise to $8.63 on sales of $3.8 billion.
International Money Express (IMXI)
Hailing from Miami, Florida, International Money Express (NASDAQ:IMXI) with its subsidiaries operates as an omnichannel money remittance services firm. It serves the domestic market along with markets in Mexico, Latin America, Central and South America, the Caribbean, Africa and Asia. The company’s remittance services include a suite of ancillary financial processing solutions and payment services.
Similar to the undervalued rebound stocks on this list, IMXI stock appears a big bargain. Right now, shares trade at 12.37X trailing-year earnings and 9.21X forward earnings. It also features a price-to-sales ratio of 1.12X. In contrast, the sales multiple for the underlying software industry comes in at 2.25X. Of course, with such a comprehensive bargain profile, fears of a value trap rise to the forefront.
However, if you believe in analyst projections, International Money certainly appears to be a legitimate opportunity. In 2024, EPS could hit $2.30 on sales of $703 million. That would mean a bottom-line expansion of 40.91% and top-line growth of nearly 7%. The high-side target also calls for EPS of $2.44 on revenue of $729.9 million. It’s worth a look.
Broadwind Energy (BWEN)
Headquartered in Cicero, Illinois, Broadwind Energy (NASDAQ:BWEN) falls under the industrial sector. Specifically, it operates under the specialty industrial machinery category. Per its corporate profile, Broadwind manufactures and sells structures, equipment and components for clean-power technologies and other specialized applications. It operates in three segments: Heavy Fabrications, Gearing and Industrial Solutions. The enterprise is a major player in wind turbine manufacturing, giving BWEN tremendous relevance.
With the political and ideological winds pushing for clean and renewable energy solutions, Broadwind seems an enticing idea. Even so, BWEN stock is extremely underappreciated. Shares trade hands for only 10.49X trailing-year earnings, below the sector median value of 23.44X. Also, BWEN is priced at only 0.49X trailing-year revenue. That’s utterly subterranean.
Now, the thing about Broadwind is that against 2024 projections, BWEN is actually overvalued. That’s because EPS of 11 cents on revenue of $156.1 million represents a decline of 69% and 23.3%, respectively.
Here’s the thing: By 2025, EPS could rise to 41 cents on sales of $204.5 million. That would imply a sizable recovery, making BWEN appropriate for speculators.
On the date of publication, Josh Enomoto 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.
