Enterprises billed as value plays represent discounts relative to intrinsic worth, so it stands to reason that undervalued value stocks will up the ante even more. Of course, investors need to recognize the risks and rewards.
On the plus side, going for ultra-bargain ideas can be beneficial for your portfolio over the long run. Once the market catches on, such investments could rise significantly higher. At the same time, deep discounts also imply lack of desirability. For example, clothing in the discount rack tend to be in sizes well outside the median.
Still, with thousands of publicly traded securities available, there are bound to be overlooked gems. With that in mind, investors should consider these undervalued value stocks.
Cisco (CSCO)
Based in San Jose, California, Cisco (NASDAQ:CSCO) operates in the communications equipment sphere. Per its public profile, the company designs, manufactures and sells internet-protocol-based networking and other products related to communications and information technology (IT).
To be sure, it’s a boring enterprise. However, that also helps the cause in terms of targeting undervalued value stocks.
Presently, the company trades at a trailing-year earnings multiple of 14.59X. In contrast, the sector median value stands at 23.99X. To be fair, for fiscal 2024, covering experts anticipate earnings per share of $3.68. That’s a bit lower than last year’s result of $3.70. However, the high-side target calls for $3.80.
In addition, fiscal 2025 may see (as a consensus target) EPS of $3.75. The blue-sky target for this year clocks in at $4.05. During the same year, revenue could rise to $54.8 billion on average, with an optimistic view of $58.7 billion. In 2023, the company posted sales of $54.17 billion.
Combined with a solid forward dividend yield of 3.33%, Cisco makes a good argument for undervalued value stocks.
General Motors (GM)
Hailing from Detroit, Michigan, automotive giant General Motors (NYSE:GM) is no stranger to the spotlight. However, it has attracted attention for the wrong reasons. Earlier, the company made a huge deal about pivoting strongly to electric vehicles. However, the sector fallout has made that decision look rather dubious. Nevertheless, GM could be a strong candidate for undervalued value stocks.
Right now, GM trades for a forward earnings multiple of 4.84X. That’s extremely low compared to other automakers. In addition, shares trade at only 0.34X trailing-year revenue. However, such low ratios seemingly dismiss analysts’ projections. In fiscal 2024, EPS could hit $9.60 on revenue of $176.19 billion. Last year, earnings landed at $7.68 per share on sales of $171.84 billion.
Fundamentally, General Motors could make a temporary pivot to hybrid vehicles. That’s exactly what the customers want. When they’re finally ready at scale for EVs, then GM can electrify its popular vehicle models. With slow but steady growth projected in the top and bottom lines, GM makes another good case for undervalued value stocks.
Intel (INTC)
Let’s end this discussion of undervalued value stocks on a super-risky idea in the form of Intel (NASDAQ:INTC). Earlier, TipRanks identified INTC as one of the best ideas in the value category to consider. It’s undeniable that the semiconductor giant is a massive player in the broader technology ecosystem. However, analysts rate shares a consensus hold due in part to the wild volatility.
One look at the year-to-date chart may give anyone who’s not a hardened speculator nightmare. At the same time, INTC may have been considerably de-risked. That’s one of the ancillary points that InvestorPlace’s Louis Navellier made. To be clear, Navellier rates INTC stock a “D” in his Portfolio Grader. Look at the 52-week chart again and it’s hard to argue.
Nevertheless, the expert remarked that “[a]t some point, Intel stock could again become cheap enough where the risks are outweighed by the possible rewards.” It’s possible that we’re near this milestone because Intel does have relevancies in areas like artificial intelligence, even if it is a “work in progress.”
It’s an extreme idea for undervalued value stocks. But there could be value here.
— Josh Enomoto
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Source: Investor Place