For many investors, especially those who are just building a portfolio, undervalued stocks under $50 hold significant appeal. Investors can start a significant position, in terms of shares owned, for a small investment. But as every investor knows, price and value aren’t the same thing.
When many investors think about undervalued stocks, they look for specific metrics. Some investors may examine technical signals, for example, like a stock trading near its 52-week low. Others may search for a favorable price-to-earnings (P/E) ratio. However, there are times when stocks that appear to be overvalued may actually be undervalued.
This article looks at seven undervalued stocks under $50 that are undervalued either by conventional metrics or simply because they still have significant upside potential.
DigitalBridge Group (DBRG)
In a digital world, there’s a strong case to be made for DigitalBridge Group (NYSE:DBRG). The global alternative asset manager focuses on investing in digital infrastructure. In 2024, that includes data centers which will house the artificial intelligence (AI) applications that will lead this next technology revolution.
In fact, DigitalBridge Group has the third largest independent global data center footprint. And, that footprint is about to get significantly larger. The company plans to build five times the number of data centers than its’s built in the last 30 years to keep up with demand.
But is the stock undervalued at 53x forward earnings? It may be. And that’s based on the company’s business model that focuses on fee related earnings. These contracted revenue streams provide the company predictable, growing revenue.
In the company’s Investor Day presentation in March, the company noted that its fee related earnings jumped 141% year-over-year (YOY). Plus, the company reported a 36% YOY compound annual growth rate (CAGR) in its fee earning equity under management (FEEUM).
Central Garden & Pet (CENT)
Central Garden & Pet (NASDAQ:CENT) is another company that, at first glance, might not seem to belong on a list of undervalued stocks under $50. CENT stock is up 76% in the last 12 months and 31% through the first five months of 2024.
As its name says, the company focuses on two key segments – Pets and Lawn & Garden. Despite challenges in both sectors, both are evergreen categories that contribute to the company’s revenue.
However, the story at the moment has less to do with revenue, which was down slightly YOY in its March earnings report. Yet, the company showed strength in every other key segment related to profitability and is taking steps to streamline the business, which should add to the bottom line in coming years. Also, it reaffirmed its guidance for the full year. Plus, the stock trades at about 18x forward earnings, which is a slight discount in the consumer discretionary sector.
Clean Energy Fuels (CLNE)
As the world continues to transition away from fossil fuels, many investors are learning that clean energy goes well beyond wind and solar. Clean Energy Fuels (NASDAQ:CLNE) is one of the world’s leading suppliers of renewable natural gas (RNG). The company has tremendous relevance as businesses strive to meet the federal government’s carbon emission goals.
Specifically, Clean Energy Fuels supplies RNG as well as liquified natural gas (LNG) and compressed natural gas (CNG) for medium and heavy-duty vehicles. Its customer base includes names such as Amazon (NASDAQ:AMZN), FedEx (NYSE:FDX) and Coca-Cola (NYSE:KO). The company has a network of over 600 natural gas fueling stations across the U.S. and Canada.
What investors take away from the company’s recent earnings reports is that RNG is likely to face the same supply-demand variables as conventional gasoline. That may provide some short-term headwinds. Also, investors have to be comfortable with the fact that Clean Energy Fuels is not yet profitable and won’t be anytime soon.
But this is, potentially, a large addressable market. And analysts are firmly behind CLNE stock. Seven out of eight analysts give it a strong buy rating and it has a consensus price target of $7.31 which gives the stock 142% upside.
Uranium Energy (UEC)
Sticking with the clean energy theme, we come to Uranium Energy (NYSEAMERICAN:UEC). The company wasn’t supposed to be undervalued at this point in 2024. Many analysts expected an explosion in uranium prices as the year started. But that rally has reversed, and like oil prices, uranium prices have disappointed.
That’s likely to change after the Biden administration’s decision to ban Russian uranium imports. In the long term, central governments are becoming more intentional about delivering clean energy solutions, nuclear energy stands out as the only truly clean energy solution.
Nevertheless, this is a highly regulated business and growth won’t move in a straight line. This is evident in Uranium Energy’s financials. Revenue is down sharply YOY which shows that the market is well supplied. Analysts are also forecasting a 75% decline in earnings per share in the next 12 months.
However, that’s not dampening analyst sentiment for now. All five analysts that have issued ratings for UEC stock give it a strong buy rating with a consensus price target of over $10 that implies an improvement of over 67%.
Revolution Medicines (RVMD)
If you’re a swing for the fences kind of investor, Revolution Medicines (NASDAQ:RVMD) may be just what you’re looking for. The clinical-stage company is focused on developing cancer treatments specific to RAS(ON) proteins. This an area that has been resistant to current oncology drug treatments. The company’s drug candidates directly inhibit these proteins from getting into their active state. This drives the “formation of a novel tri-complex and blocking oncogenic signaling.”
RVMD stock plunged sharply after it had a setback with some clinical trial data in October 2023. But the company is amply funded after its acquisition of EQRx and has a deep pipeline. This is one you’ll have to wait on as the clinical trial process is expensive and can’t be rushed.
As a company that’s not yet profitable and has limited revenue coming through the door, valuations can be tricky. Nevertheless, analysts remain bullish on RVMD stock with 12 out of 13 analysts giving the stock a strong buy rating.
Bristol-Myers Squibb (BMY)
Bristol-Myers Squibb (NYSE:BMY) is a more conventional biopharmaceutical company on this list of undervalued stocks under $50. The company has a massive pipeline of existing and clinical-stage oncology drugs. However, investors are a little sour on BMY stock due to concern over expiring patents.
However, this is where size makes a difference. As a large-cap company, Bristol-Myers has the ability to acquire companies and that’s exactly what it’s been doing. However, that’s come with a short-term hit to the company’s earnings. That is one reason to explain the post-earnings dip in BMY stock.
The bottom line should improve as the company bring more drugs to market. Plus, the company has an initiative that will help make drugs more accessible in low- and middle-income countries.
In the short term, BMY stock is trading at a five-year low which simply seems like an overreaction. Analysts have a consensus Hold rating on the stock, but a bullish price target suggests that this is a dip you’ll want to buy, particularly when you get a dividend with a yield of 5.8% while you wait.
Five9 (FIVN)
Five9 (NASDAQ:FIVN) is an under-the-radar AI stock to consider before other investors catch on. The company provides cloud contact center software. Unlike traditional call centers, contact center software gives companies a tool to manage customer interactions across a variety of channels (e.g. social media, emails, chatbots, etc.). This is a market that is expected to grow at a compound annual growth rate (CAGR) of 9.1% between now and 2030.
That’s a nice opportunity being fueled by generative AI, but it is coming at a cost. Five9 is not profitable, in large part due to its AI investments. However, the company continues to deliver year-over-year (YOY) increases in new and annual recurring (ARR) revenue.
That trend will have to continue if the company is going to become profitable. In the meantime, it’s important to note that 96% of FIVN stock is owned by institutions. That should help keep volatility down while still offering plenty of upside for one of the undervalued stocks under $50.
On the date of publication, Chris Markoch 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.
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