In investing, overlooked stocks with the potential for significant growth and profitability are akin to uncovering hidden treasures. Here is a critical exploration of three often-overlooked companies with compelling narratives and solid fundamentals.
These make them solid choices that may yield high returns. These stocks may be identified despite their unique strengths and market positions in a sea of investment options with many big names.
The first company is responsible for charging for alternative power vehicles, particularly electric buses. It generated record-breaking revenues and a solid order backlog that underscores its market dominance.
The second one navigates macro challenges adeptly while driving solid revenue growth and expanding its client base, enhancing its competitive edge. Meanwhile, the third company excels in technological solutions, demonstrating substantial revenue growth and margin expansion across key sectors like communications and aerospace.
In short, these companies can optimize their portfolios for growth, and these overlooked stocks present opportunities that merit attention. These picks redefine investment strategies and yield substantial returns when pursuing overlooked stocks.
Blue Bird (BLBD)
Blue Bird (NASDAQ:BLBD) manufactures school buses with advancements in alternative power vehicles, including electric buses (EVs). In Q2 2024, the company attained an all-time quarterly sales of $346 million, marking a 15% increase over the previous year.
The high revenue growth indicates strong market demand and sharp pricing strategies. Higher selling prices and a richer mix of EVs and type D buses particularly lead to this. Blue Bird reported an adjusted EBITDA of $46 million for the quarter, with a notable margin of 13%. The high EBITDA margin reflects efficient cost management and pricing strategies.
Further, The company’s order backlog stood at approximately $850 million. This encompassed over 5,900 buses, up nearly 30% from the previous quarter. This substantial backlog indicates solid future revenue visibility and strong market demand, supported by an order pipeline that exceeds current sales by 60%. Alternative-powered vehicles, including EVs, represented 55% of total unit sales in Q2, with EV sales increasing by 56% annually.
Overall, Blue Bird strategically focuses on EVs amidst the growing demand for sustainable transportation. Therefore, revenue milestones and a solid order backlog solidify its presence among the top overlooked stocks.
PagSeguro Digital (PAGS)
PagSeguro Digital (NYSE:PAGS) operates as a provider of fintech solutions in Brazil. The company’s Total Revenue increased by 15% annually, reaching an all-time high of 4.3 billion reais. This growth was driven by robust Total Payment Volume (TPV) and revenue expansion across all client segments.
The Gross Profit Margin for the quarter stood at 40.6%, reflecting sharp cost management and operational edge. This margin points out that PagSeguro Digital has successfully balanced growth and profitability, ensuring that the increase in revenue translates into substantial profit.
Moreover, by the end of March 2024, the company had reached 31.4 million clients, with 17.3 million active clients. An all-time high in deposits accompanied this expansion. The deposits reached 30.6 billion reais, a substantial 64% annual increase. The high deposit levels contribute to lowering the cost of funding for PagSeguro Digital. This, in turn, increases the prepayment spreads and net interest margin of its credit portfolio, ultimately boosting profitability.
To sum up, PagSeguro’s top-line and deposit boost, combined with client expansion, make it a strong candidate among the top overlooked stocks.
Celestica (CLS)
Celestica (NYSE:CLS) provides electronics companies with supply chain and end-to-end product lifecycle solutions. Operationally, Celestica maintains solid financial discipline and sharp working capital management. This indicates an adjusted return on invested capital (ROIC) of 24.8% for Q1 2024.
This is up significantly from 17.9% in Q1 2023. Moreover, the company’s adjusted free cash flow surged to $65 million in Q1 2024. This substantially increased from $9 million in Q1 2023, reflecting improved operational cash generation capabilities and reinforcing its financial flexibility.
Looking ahead, Celestica holds optimism about its growth prospects for 2024. The company raised its full-year revenue outlook to $9.1 billion and adjusted EPS to $3.30. It represents respective increases of 14% and 36% compared to 2023. This upward revision reflects confidence in sustained demand across key end markets and the continued execution of strategic initiatives.
Similarly, the Communications, Consumer, and Enterprise Segment (CCS) segment may derive mid-20% revenue growth in 2024, supported by ongoing investments in capacity expansion and engineering capabilities to meet the growing demand for AI and networking infrastructure.
In short, Celestica’s strong return, top-line potential, and bottom-line improvement solidify its presence on the list of the top overlooked stocks.
— Yiannis Zourmpanos
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Source: Investor Place