With the market again printing some choppy price action, concerned investors may be better served with undervalued stocks to buy. Basically, it comes down to risk mitigation.
Yes, the benchmark S&P 500 index is up about 13% on a year-to-date basis. Also, a robust U.S. GDP performance in the third quarter seemingly justifies the optimism. At the same time, the equities sector sits noticeably below the peak levels seen during the summer months. As a result, it’s natural for investors to be skeptical.
At the very least, it’s possible that previously hyped-up entities could suffer a correction. That means bidding up these names may leave you holding the bag – and not a good kind of bag. On the other hand, if you elect undervalued stocks to buy, you may leave yourself with a safety margin. After all, these ideas are in the shadows.
To be clear, risks always abound in the capital market. However, with a possible correction on the horizon, it makes sense to at least consider the below undervalued stocks.
Dick’s Sporting Goods (DKS)
On paper, Dick’s Sporting Goods (NYSE:DKS) makes a solid case for undervalued stocks. Right off the bat, DKS trades at a trailing earnings multiple of 9.81x. As well, the market prices the shares at 8.97x forward earnings. For context, the underlying sector multiples for the two ratios are 16.13x and 12.99x, respectively. Also, DKS gave up more than 8% of its equity value since the January opener.
However, does Dick’s represent one of the undervalued stocks to buy? After all, the company cratered a few months ago in August. Further, management’s proposed holiday hiring slipped to 8,600 workers higher labor costs. Such a framework suggests that Dick’s is suffering demand loss. That might make the stock a value trap rather than a discounted opportunity.
Nevertheless, with evidence indicating that the revenge travel sentiment is fading, consumers may look for bang-for-the-buck purchases. It’s possible that this narrative could benefit sporting goods retailers.
Analysts rate DKS a moderate buy with a $130.18 price target, projecting nearly 18% upside.
FMC (FMC)
Again, from a cursory look, chemical manufacturing company FMC (NYSE:FMC) appears one of the undervalued stocks to buy. Currently, FMC trades at a trailing-year earnings multiple of 13.92x. Also, shares trade at 10.68X forward earnings. In contrast, the underlying sector ratios land at 17.27x and 10.44x, respectively. Adding to the argument, FMC’s price/earnings-to-growth ratio sits at only 0.38x. That’s favorably lower than almost 80% of companies listed in the agriculture space.
To be sure, FMC is more appropriate for speculators – and extreme ones at that. Since the beginning of the year, the security fell more than 56%. Granted, it’s here where conservative investors will swipe left for a different opportunity. But market gamblers might view the red ink as a substantially de-risked enterprise.
Now, the reality is that FMC recently missed its Q3 targets for revenue and earnings per share. However, these weren’t what I would call glaring misses. Also, the implications for the global food supply chain is massive. Overall, analysts remain bullish, pegging FMC a moderate buy with a $77.71 target, implying 42% growth.
Crescent Energy (CRGY)
For those investors who want to jump into risky waters, Crescent Energy (NYSE:CRGY) makes an interesting case for undervalued stocks to buy. Based in Houston, Texas, Crescent is a growth-oriented independent energy firm. Per its website, the company focuses on the acquisition, development, and operation of oil and natural gas properties. Since the start of the year, CRGY gained a bit over 9%.
At the moment, CRGY trades at 12.6x trailing earnings without non-recurring items (NRI). In contrast, the sector median lands at 9.1X. Per investment data aggregator Gurufocus, this stat ranks better than 71.47% of its peers. Also, the market prices CRGY at 2.03x operating cash flow. For comparison, the oil and gas sector’s median metric comes in at 4.63x.
Naturally, one point of contention about hydrocarbons is broader relevancy. However, with demand for electric vehicles stalling and inventory subsequently piling up at dealership lots, hydrocarbons still offer pertinent sources of energy. Finally, analysts rate CRGY a moderate buy with a $17.80 target, projecting over 42% upside.
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.
