In the world of stock market dynamics, the correlation between earnings growth and stock prices stands as firm as ever. Amidst the flurry of market activity, three stocks stand out – their potential for double and triple-digit growth rates in stark contrast to their current deep discounts exceeding 30% from their 52-week peaks. Whether residing in the realm of the overlooked or just plain forgotten, these underrated stocks possess a potential that belies their current bargain prices.
Hecla Mining HL, Wayfair Inc. W, and Mobileye Global Inc. MBLY are names that merit a place on the ‘growth at a discount’ watchlist. With tailwinds blowing in from the global economy, coupled with above-average earnings per share (EPS) growth potential, investors stand poised to reap double-digit returns in this burgeoning market cycle.
At the heart of the stock market lies a methodology known as ‘top-down’ analysis, a tool utilized by seasoned traders to decipher macroeconomic trends. By gaining insights into the impending economic landscape, investors can make more informed decisions regarding potential areas where their monetary investments could yield significant returns.
Preparing for a Financial Shift
The analysts at The Goldman Sachs Group Inc. GS have unveiled a peek into their 2024 playbook. Through their macro outlook report, it becomes evident that the investment giant anticipates a renaissance in the U.S. manufacturing sector.
This expectation finds validation in the 6.4% surge witnessed in new export orders – a record-breaking high for the ISM manufacturing PMI index in February. The implications are clear; there is a surge in demand looming on the horizon for precious metals, home furnishings, and original equipment manufacturers (OEMs).
The savvy minds at Goldman place their bets on potential interest rate cuts by the Federal Reserve (the Fed) as a catalyst for manufacturing reinvigoration. Early signs point in their favor, with lower interest rates projected to weaken the dollar, rendering U.S. exports more appealing to overseas buyers.
Yet, the ripple effects of lower interest rates extend far beyond manufacturing resurgence. From a surge in luxury goods demand (silver) to an uptick in home purchases (furniture) and a surge in car financing activity (necessitating OEM parts), the economic landscape stands ripe for investors to seize upon favorable opportunities.
The Golden Era for Precious Metals
Following a record-breaking ascent in gold prices, the pathway has cleared for other precious metals to ascend to new heights. Silver, in particular, has marked a stunning 23% rally since the close of the fourth quarter of 2023. While investors could opt for the risks associated with futures contracts to capitalize on rising silver values, a more prudent path lies ahead.
History reveals the propensity for mining stocks to track and even amplify the price trajectory of the commodities they mine. Hecla Mining stands tall in this narrative, with analysts anticipating an eye-popping 700% EPS growth over the next 12 months.
As a purveyor of silver, Hecla stands poised to capitalize on the uptick in silver prices, translating into robust profit margins in the impending quarterly reports. Bearing in mind that the stock languishes at a mere 61% of its 52-week pinnacle, esteemed institutions like Vanguard have augmented their stakes in the company by 0.6%, orchestrating a substantial $1.6 million transaction.
Delving deeper, Hecla’s forward price-to-earnings (P/E) valuation, pegged at 53.3x forward P/E, signals a stark contrast to the mining industry’s average valuation of 15.2x. The market’s decision to shell out a premium for this stock is a testament to the underlying justifications propelling its upward trajectory – a narrative that investors are swiftly unwrapping.
The tide of lower interest rates spells a weakened dollar, a boon for silver prices denominated in dollars, setting the stage for a seemingly evident investment thesis – anticipating a surge in silver valuations down the line.
Furnishing a Future of Double-Digit Growth
Enter Wayfair, riding the crest of a significant trend that illuminates the potential upside inherent in its stock. As the astute eye of Warren Buffett spots the brewing storm in real estate equities, the ancillary beneficiaries of this boom – like the furniture industry – stand to reap the rewards.
Echoing this sentiment is Morgan Stanley, touting a price target of $80 for Wayfair, underpinned by a forecasted 176% EPS growth for the current year. These bullish indicators find credence in the burgeoning real estate sector, poised to beckon Wayfair as the go-to source for adorning newly acquired abodes.
Cruising into the Future: The Automobile Industry and OEM Parts
In a landscape where lower interest rates serve as the impetus for increased automobile financing, retail entities face the onus of replenishing their OEM inventory, making Mobileye a pertinent player in this unfolding saga.
The discerning moves of The PNC Financial Services Group Inc. PNC and Vanguard, augmenting their exposure to Mobileye stock amid a 36% rally last quarter, underline the stock’s allure trading at a meager 66% of its 52-week high prices, positioning it as a growth tale shrouded in affordability.
With a projected EPS growth of 358% for the fiscal year, industry analysts’ 42% upside projections, alongside a $44.3 share price target, come as no surprise. Venturing into the realm of valuations, Mobileye’s 42.7x forward P/E valuation stands 324% above the industry mean of 10.1x, reinforcing the notion that greatness often commands a premium.
The article “3 Cheap Stocks That Shouldn’t Be Cheap for Long” first appeared on MarketBeat.
