In many cases, overlooked value stocks represent a clear mixed bag. Yes, companies that underperform certain benchmarks or expectations are technically “undervalued.” But that doesn’t necessarily mean they’re great deals.
On the other hand, the equities sector features thousands of publicly tradable ideas. Practically, it’s impossible to cover them all. The market is not a perfect democracy and so, it’s inevitable that certain hot names will hog the most attention. I’m not a huge fan of this phrase but it is what it is.
Of course, as astute investors, you can pick up on certain discounts that are potentially overlooked for capricious reasons; basically, they’re not receiving any of the spotlight because other enterprises have taken it. Or, they could be suffering from excessive bearishness that may be unwarranted. Whatever the individual case may be, here are overlooked value stocks to consider.
STMicroelectronics (STM)
A multinational corporation and technology firm, STMicroelectronics (NYSE:STM) – which is commonly known as ST – is the largest European semiconductor contract manufacturing and design company. Primarily, the company is best known for its integrated circuits (ICs) for specific applications and its microcontrollers.
Financially, what makes STM one of the overlooked value stocks is the attention directed toward artificial-intelligence-driven ideas. As you’ve seen, frontline AI-related enterprises have seen their public equities soar. However, ST occupies more of a background role, as important as it is. Therefore, its year-to-date performance is quite humble, down 3%.
Currently, shares trade at 15.6X forward earnings, which is well below the sector median 25.48X. Also, its price/earnings-to-growth (PEG) ratio sits at 0.35X. Again, that’s significantly underneath the sector median of 1.58X.
In fairness, analysts project slowing growth in 2024. However, sales in 2025 should hit $17.56 billion. Overall, Wall Street experts rate shares a consensus strong buy with a $48.40 average price target. The high-side target lands at $55, implying over 17% growth potential.
Cheniere Energy (LNG)
With all the talk about green and renewable energy sources and infrastructure, it may not be surprising to see Cheniere Energy (NYSE:LNG) ranked among overlooked value stocks. Specializing in liquefied natural gas, Cheniere represents the contemporary energy paradigm. However, as countries pivot to renewables, LNG stock may lose some relevance. Perhaps unsurprisingly, shares are down more than 9% since the beginning of this year.
To be sure, analysts have a rather dim view of the hydrocarbon specialist’s prospects. By the end of this fiscal year, they project sales to reach $16.97 billion. However, that would imply a drop of almost 17% against last year’s haul (of $20.39 billion). That said, sales should fly to $21 billion by the end of 2025.
Still, let’s also consider changes in the political and geopolitical realms. With a contentious race in 2024, the Democrats might not hold power soon. Even if they did, geopolitical realities may force the U.S. to consider boosting its hydrocarbon infrastructure.
Right now, LNG trades for less than 4X trailing-year earnings. That seems low especially in light of its unanimous strong buy assessment.
Baidu (BIDU)
A multinational tech firm, Baidu (NASDAQ:BIDU) specializes in internet-related services, products and artificial intelligence. Per its public profile, the company represents one of the largest AI and internet companies in the world. You’d think that would place it as the most popular security – or close to it. However, BIDU happens to be ranked among the overlooked valued stocks.
That wasn’t the case between the doldrums of the Covid-19 crisis to early 2021. At the peak, BIDU stock traded hands at well over $300 per share. However, concerns about China’s economy resilience has plagued Baidu and its peers. Now, it’s playing the role as one of the overlooked value stocks. For example, shares trade at only 9.42X forward earnings.
However, as others have argued, Baidu may be an ignored AI trade that’s worth a second look. You take away the ugly Chinese economy narrative and the specific fundamentals of AI-related operations look enticing.
Finally, analysts overwhelmingly support BIDU stock, rating it a unanimous strong buy. Also, the average price target clocks in at $164.52, projecting almost 66% upside potential.
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.
