One of the most important things stock investors should look at is the fundamentals of a company. Each earnings season shows us how a compare fares and we get this idea through the fundamentals. It helps determine the fair market value of the stock. If the company has a strong foundation, it has the ability to swim through the floods and storms that the market volatility brings.
Since it is not possible to time the market, it is possible to look at the fundamentals before you bet your money on a stock. Here are the seven most undervalued stocks with strong fundamentals to add to your portfolio. They have high growth potential and the ability to keep growing, no matter how the market moves. Let’s dive into them.
Undervalued Stocks With Strong Fundamentals: General Motors (GM)
A legacy automaker, General Motors (NYSE:GM) has been in the industry for over a century and it has seen several market ups and downs. However, this company has managed to survive it all. The company recently reported results and beat expectations. Despite a high-interest environment, the company reported a revenue of $43.01 billion, up 7.6% year-over-year and the net income increased 26% to hit $2.95 billion.
It has raised full-year expectations and is now aiming for adjusted earnings between $12.5 billion to $14.5 billion. Trading at $45, GM stocks look undervalued to me, and with a strong start to the year, it is set to maintain the momentum. General Motors looks promising and it plans to manufacture between 200,000 and 300,000 EVs in the year.
It has a dividend yield of 1.06% and the management has raised the adjusted free cash flow expectations to $8.5 billion to $10.5 billion, up from the forecast of $8 billion to $10 billion.
Airbnb (ABNB)
It is natural to see market volatility during the earnings season and several companies, including Airbnb (NASDAQ:ABNB), have seen their stock slump despite reporting strong numbers. However, if you look at the bigger picture, Airbnb is one stock with strong fundamentals and tremendous growth potential.
Trading at $147, ABNB stock is slightly higher than when it went public but this dip is a chance to buy. The company reported a revenue of $2.14 billion for the first quarter, up 18% YOY, and the earnings stood at $0.41 per share.
Its profit has doubled to $264 million but the investors weren’t happy with the second quarter guidance which led to the dip in stock.
The company is in a transition year but it has strong fundamentals and is in a significant position to benefit from the global travel surge.
Overall, the company has an efficient business, a strong global presence, and solid fundamentals that will help the business grow. Additionally, it is up 26% in the past six months.
Oracle (ORCL)
Tech company Oracle’s (NYSE:ORCL) shares have doubled in the last five years and yet they look undervalued. The company’s data center business is thriving and it has partnered with some of the top tech giants including Microsoft (NASDAQ:MSFT), Nvidia (NASDAQ:NVDA), and Palantir (NYSE:PLTR) for cloud services that can boost revenue. The demand for Palantir and Nvidia’s products will be on the rise and this will benefit Oracle.
Trading at $116, the stock is up 12% YTD. A legacy business, the company reported a 49% YOY growth in the cloud infrastructure revenue and this number could soar higher in the coming quarters. The demand for AI is not going to fade anytime soon and this means Oracle has a lot more to come. It is set to invest $8 billion in cloud infrastructure and AI in Japan over the decade.
The company has strong fundamentals and the liquidity to keep expanding its business. Its total outstanding performance obligations hit $80 billion, up 29% YOY which shows the company’s strength in attracting users. It is one of the most undervalued stocks with strong fundamentals.
Coca-Cola (KO)
Trading at $62, and up 5% YTD, global giant Coca-Cola (NYSE:KO) is an undervalued stock with stellar fundamentals. The company has been around for years and weathered many storms. It is a dividend aristocrat with a dividend yield of 3.09%. It has a business model that helps keep the operating costs low while ensuring steady revenue. The company spends the maximum on advertising and marketing.
In the first quarter, it reported an 11% rise in organic sales and achieved volume growth through distribution practices. The company has managed to keep the costs in control to achieve volume. Warren Buffett’s favorite stock, Coca-Cola enjoys pricing power in the industry and has diversified into healthy beverages to meet the changing demands of consumers.
Coca-Cola is highly profitable and the best stock to own for long-term investors. It has a dividend payout ratio of 79%, making it better than the majority of its competitors in the industry. Coca-Cola is a cash-generating machine that is not going to slow down anytime soon.
Undervalued Stocks With Strong Fundamentals: Morgan Stanley (MS)
Buying Morgan Stanley (NYSE:MS) below $100 is a smart move. The financial company has become a household name and managed to remain relevant even in an economic turmoil. Up 4% YTD and 17% in the past 12 months, MS stock is exchanging hands for $98 right now. While it is at a 52-week high, the stock will soon start moving into triple digits.
Its investment banking segment has rebounded and results showed that the company has set strong momentum for the year. The income from investment banking increased by 16% while the wealth management segment grew by 5%. It ended the quarter with a revenue of $15.14 billion while the EPS stood at $2.02.
Morgan Stanley will continue to see higher wealth management revenue as the economic conditions improve followed by a rate cut. It has a strong balance sheet and believes in rewarding investors. The company has a dividend yield of 3.47% which makes it a top choice for passive income investors.
Johnson & Johnson (JNJ)
Healthcare giant Johnson & Johnson (NYSE:JNJ) reported strong quarterly numbers but the weaker-than-expected guidance for the second quarter pulled the stock down. Trading at $149, the stock is moving closer to the 52-week low and this is your chance to buy the dip.
One of the best healthcare companies, Johnson & Johnson has been in trouble due to the lawsuits but it has agreed to pay $6.5 billion for the talc cancer lawsuit which will provide relief to the company.
In the quarterly results, its sales came in at $21.4 billion, up 3.9% YOY where innovative medicine was the fastest growing segment with a revenue of $13.6 billion. The company is no longer dependent on vaccine growth and is seeing strong revenue growth in the innovative segment.
A dividend aristocrat, JNJ has enough liquidity to keep rewarding shareholders for years to come. It enjoys a dividend yield of 3.31% and a payout ratio of 64%. Johnson & Johnson is a highly reliable healthcare stock that is trading at a discount right now.
Alphabet (GOOG,GOOGL)
A highly undervalued stock, Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) has soared 500% in the past decade and is trading for $171 today. Looking at the company’s fundamentals, business structure, and long history, there is still ample potential for the stock to soar. Alphabet is investing heavily in Artificial Intelligence and this investment is going to pay off.
The company reported blowout earnings with a 15% YOY rise in revenue to $81 billion and about 80% of this revenue is driven by the advertising segment. The ad business has rebounded and the company saw its net income jump 57% to $23.66 billion. It also announced the first-ever dividend and a buyback.
Alphabet’s cloud business, advertising, and service segment is thriving and there is no slowing its momentum. I believe Google Cloud will remain one of the biggest revenue generators in the next five years. One of the best businesses out there with solid fundamentals, you will never regret owning Alphabet stock.
On the date of publication, Vandita Jadeja did not hold (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.
