Undervalued stocks, let’s talk about them. Typically, when you come across a list of equities that are supposedly discounted, you’re dealing with industry comparisons. That is, such-and-such company trades at X multiple, whereas the industry trades at X plus some baggage. In other words, the target enterprise is leaner and meaner.
However, that may not be the best way to go about finding a discount. It’s vital to consider realistically what the company will produce in terms of earnings and sales. If a consensus of analysts believe the entity is headed toward a downcycle, guess what? Those undervalued stocks may become even more undervalued – that’s bad news for you.
Instead, I think it may be helpful to consider what the average multiple the market previously accepted was. By looking at and juxtaposing analysts’ consensus view, we can better determine if a discounted security can grow into its prior valuation.
For the information, I’ll be relying heavily on Yahoo Finance, specifically the sections labeled “Statistics” and “Analysis.” With that, let’s do a deep dive into undervalued stocks.
Comcast (CMCSA)
Let’s just get into the meat of the theme with Comcast (NASDAQ:CMCSA). A telecommunications and content media giant, CMCSA stock currently trades at a forward earnings multiple of 9.02X. Over the past year – specifically between the first quarter of 2023 to Q1 2024 – CMCSA carried an average forward multiple of 10.64X.
However, here’s why Comcast is so intriguing. For fiscal 2024, analysts project that earnings per share may rise about 5.8% to $4.21. In fiscal 2025, this figure may expand to $4.49. So, you can do the quick math here. Assuming the projections hold true, CMCSA at 9.02X can grow into 10.64X because that’s what the market previously accepted.
On the top line, CMCSA stock trades at 1.28X trailing-year sales. In the past year, the market priced shares at a revenue multiple of 1.49X. Analysts are looking for fiscal 2024 sales to reach $123.89 billion, up 1.9%. Thus, it can potentially grow into its revenue multiple. Combining the two, Comcast genuinely appears as one of the undervalued stocks.
Johnson & Johnson (JNJ)
A potentially great candidate for undervalued stocks, Johnson & Johnson (NYSE:JNJ) is a powerhouse in pharmaceuticals and medical technology. Presently, JNJ stock trades at a forward earnings multiple of 13.72X. However, in the past year, the multiple averaged 14.78X. That’s quite some room in which to expand.
Covering experts believe that in fiscal 2024, J&J’s EPS will rise 7.06% to $10.62. Previously, the stat sat at $9.92. In the following year, the metric may rise to $10.91. It’s worth noting that the high-side EPS estimate for the aforementioned years stand at $10.85 and $11.53, respectively.
Now, let’s look at the top line. JNJ stock currently trades at 4.28X trailing-year sales. During the past year, this metric averaged almost 4.41X. For fiscal 2024, analysts anticipate that the top line may expand by 3.9% to hit $88.46 billion. In the following year, revenue could see a lift of 2.9% to $91.02 billion.
In closing, J&J also offers a forward dividend yield of 3.4%. That makes it an enticing idea for undervalued stocks.
Becton Dickinson (BDX)
A specialist in the field of medical instruments and supplies, Becton Dickinson (NYSE:BDX) is a hugely relevant player in healthcare. By that fact alone, BDX makes an interesting case for undervalued stocks. As for the numbers, Becton trades at a forward earnings multiple of 15.58X. In contrast, over the past year, the multiple averaged 18.94X.
What makes the proposition tempting is the analysts’ consensus view. They’re looking for EPS to rise 6.9% to $13.05. Last year, the metric sat at $12.21. In the following year, EPS may rise again to $14.28, a 9.45% lift. Further, the high-side estimates for the aforementioned periods comes in at $13.15 and $14.60, respectively.
On the top line, experts believe that sales may rise 4.4% to hit $20.23 billion. In the following year, the top line could expand to $21.4 billion, an increase of 5.8%. Here’s the thing: BDX stock trades at 3.41X trailing-year sales. In the past one-year period, the multiple clocked in at 3.8X.
With room to grow on both ends, BDX is one of the undervalued stocks to buy.
Baidu (BIDU)
China’s Baidu (NASDAQ:BIDU) is a trickier case among undervalued stocks due to lingering concerns about the underlying core market. However, it’s difficult to deny the potential discount on hand. Right now, BIDU stock trades at a forward earnings multiple of 8.79X. However, during the past year, the average multiple ran up to 12.95X. That’s potentially a lot of room for expansion.
Here’s where it gets difficult. Analysts are looking for EPS of $11.22 for fiscal 2024. That’s down 1.75% from the prior year. A problem? It doesn’t look great. However, keep in mind that in fiscal 2025, EPS may jump to $11.82, a rise of 5.35%. Further, the expected decline in fiscal 2024’s EPS doesn’t seem to justify the huge drop in the earnings multiple.
On the top line, BIDU stock trades at 1.66X trailing-year sales. During the past year, the sales multiple previously stood at 2.53X. For fiscal 2024, experts are looking for revenue of $19.32 billion. That’s up 1.9% from last year’s print of $18.95 billion. Further, fiscal 2025’s top line could rise by 6.8%.
Overall, it’s a solid case for undervalued stocks to buy.
Las Vegas Sands (LVS)
Resorts and casinos giant Las Vegas Sands (NYSE:LVS) could make for a very intriguing case for undervalued stocks. Fundamentally, consumers are still prioritizing travel and experiential events. Currently, LVS stock trades at 16.1X forward earnings. During the past one-year period, the multiple ran up to 27.51X. Even being generous, the last three quarters stood at 16.55X.
So, there’s room for expansion. For fiscal 2024, experts believe that EPS could rise 42.3% to hit $2.69. That’s a massive leap from last year’s print of $1.89. Also, in fiscal 2025, EPS could rise again to $3.07. If so, that would be a 14.1% gain from the prior year’s projected metric.
On the top line, the market prices LVS stock at 3X trailing-year sales. In the past year, the metric soared to 6.49X. In the past three quarters, the multiple still came in at 4.46X. For fiscal 2024, analysts see revenue rising 13.5% to $11.77 billion. Fiscal 2025 could see a 7.9% bump to $12.7 billion.
If these estimates hold, Las Vegas Sands is definitely one of the undervalued stocks.
Dollar Tree (DLTR)
I’ve criticized discount dollar store Dollar Tree (NASDAQ:DLTR) before in other publications, in large part due to its gross-margin erosion. Concerns still exist. However, with shares down 26% year-to-date, it makes for an intriguing bargain play. DLTR stock trades at 16.05X forward earnings. In the past year, this metric stood at almost 20.1X.
Contrarian investors may want to give DLTR stock a chance because experts believe in bottom-line expansion. Specifically, fiscal 2025 EPS could see a 12.9% lift to $6.65. Last year, it was $5.89. For the following fiscal 2026, they’re targeting earnings of $7.86 per share. If so, that would imply an 18.2% gain.
On the top line, DLTR stock trades at 0.74X. In the past year, this metric averaged about 1.02X. What’s more, experts see modest growth of 2.1% in sales to $31.26 billion. Last year, revenue came out to $30.6 billion. For fiscal 2026, sales could see a 5.1% bump up to $32.84 billion.
It’s risky given the red ink in the charts. Still, it also makes an enticing case for undervalued stocks.
Aptiv (APTV)
Part of the consumer cyclical sector, Aptiv (NYSE:APTV) operates in the auto parts industry. With cars integrated advanced safety features, Aptiv should be relevant for years to come. Right now, the market prices APTV at 11.67X forward earnings. Over the past year, this metric clocked in at 18.92X. That seems like a lot of room for growth.
Perhaps not surprisingly, analysts anticipate 24.7% expansion in EPS to $6.06. Last year, the company posted earnings of $4.86 per share. Moving onto fiscal 2025, experts believe that the bottom-line metric could hit $7.73 per share. If so, that would be a 27.6% gain from last year’s EPS of $6.06.
On the top line, APTV stock traded at a trailing-year revenue multiple of 0.97X. During the past one-year period, the metric landed at 1.41X. For fiscal 2024, analysts see sales rising to $21.15 billion, up 5.5% from the prior year. In the following year, sales could rise again by 7.2% to reach $22.66 billion.
All in all, Aptiv makes a strong case for undervalued stocks to buy.
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.
