Unearthing undervalued stocks in today’s sky-high market is akin to foraging for treasure in a vast, bustling metropolis. With stocks scaling dizzying peaks, determining a stock’s true worth demands both an artist’s flair and a scientist’s precision. Attempting to outwit the mercurial whims of Mr. Market is a venture fraught with folly.
Yet, by adopting a farsighted stance and honing in on the bedrock fundamentals, it’s plausible to spot stocks languishing at bargain basement levels. For savvy investors eyeing monumental returns, these undervalued stocks could inject rocket fuel into a portfolio’s performance. What’s more, their discounted price tags offer a shield of safety to weather tempestuous financial seas. As investment gurus like Warren Buffett and Benjamin Graham have extolled, acquiring premium companies at fire-sale prices is a tried-and-true avenue to amassing riches.
With that beacon in sight, here are seven undervalued stocks priced under $20 that warrant exploration:
Quest for Value: Qurate Retail (QRTEA)
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Qurate Retail Group (NASDAQ:QRTEA), a pioneer in video commerce and advertising across multiple platforms, navigates a sea change in digital marketing dynamics as the world drifts from television screens to the digital realm. This explains the hefty investments tealery in the realm of cyberspace. Qurate Retail shines in this arena.
Setting itself apart, Qurate Retail focuses on live broadcasts showcasing products and exclusive sales to entice consumers. Diversification into mobile apps and e-commerce has kept the company at the vanguard of modern trade.
Despite weathering significant challenges of late, as evidenced by a beleaguered stock chart, signs of a turnaround are afoot. An entry at this juncture could potentially yield substantial returns in the ensuing months or years should the tides turn favorably.
The stock has plummeted by a staggering 93% over half a decade, yet the hemorrhage has abated, with shares meandering around $1 for over a year. The primary drag remains the hefty $7.3 billion debt mountain, triggering hefty interest payments amid rate hikes, leading to significant balance sheet erosion recently. Although scaled-back expansions have nudged revenues southward, they have propped up profits, staving off dire losses. Forecasts tip earnings per share to reach 66 cents by 2024, translating to a mere forward P/E ratio of 1.7x. At a bargain-bin 0.04x forward sales, a potential resurrection post-inevitable rate drops could fuel a cash gusher, kindling further revenue growth.
Pavement to Prosperity: The Goodyear Tire & Rubber Company (GT)
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The Goodyear Tire & Rubber Company (NASDAQ:GT), an illustrious name in global tire and rubber product manufacturing, operates across diverse regions globally. The crux of its business revolves around designing, producing, distributing, and vending tires for sundry applications. Like many peers in the auto sphere, Goodyear has grappled with hurdles lately. While not in as dire straits as QRTEA, Goodyear faces challenges. Yet, a gradual recuperation seems underway, poised to spark robust gains ahead.
Goodyear is diligently paring down its debt-ridden balance sheet, sporting $8.65 billion in obligations versus a mere $902 million in cash reserves. Notwithstanding substantial interest payouts amid rate hikes and slumping car sales pressuring the broader tire market, the company is deftly managing losses. Analysts envision a colossal margin boost in the offing. Forecasts peg EPS at $1.24 for 2024, signaling a meager 10x forward P/E ratio. Projections hint at near-doubling EPS from 2024 to 2026, with revenues anticipated to arrest their descent by 2025 and embark on a subtle yet steadfast ascent. I’ve got my sights trained on margins at present. A cascade of rate reductions should herald a quick about-face in Goodyear’s fortunes.
Silicon Symphony: StoneCo (STNE)
Unearthing Hidden Gems in the Fintech World
StoneCo: A Diamond in the Rough
StoneCo (NASDAQ: STNE) stands out as a Brazilian fintech powerhouse, resembling a phoenix rising from the ashes with its anticipated revenue growth trajectory. While the stock slumbers 82% below its 2021 peak, the groundwork for resurgence is laid as it meanders sideways. This intriguing setup offers investors a tantalizing opportunity to scoop up a deeply discounted fintech gem trading at just 13 times forward earnings. Moreover, as the financial sector undergoes an unattractive phase, StoneCo may emerge as a beacon of light once the economic landscape normalizes.
Delving into StoneCo’s financial footprint, the company basks in the glow of Brazil’s effective implementation of rate hikes and cuts to combat inflation promptly. These ongoing cuts serve as a propelling force, nurturing the business back to health and positioning it for the forecasted 31% net income compound annual growth rate (CAGR) from 2024 to 2027. With a remarkable 90% credit portfolio CAGR also in the cards, StoneCo appears poised for a prosperous future fueled by burgeoning profits.
While its revenue growth rate has cooled from triple digits of yesteryears, reigniting a 30%+ annual growth momentum could trigger a significant rerating for StoneCo. Bolstered by a robust financial position boasting $2.5 billion in cash against $1.1 billion in debt, the company is well-equipped to fuel expansion strategies when opportune conditions arise. In my view, StoneCo shines as one of the most undervalued stocks in the market landscape.
PagSeguro: Navigating Growth Waters
PagSeguro (NYSE: PAGS) emerges as another Brazilian fintech protagonist navigating the tumultuous seas of growth with a stock chart that echoes StoneCo’s trajectory. With a commendable doubling in stock value from its November 2023 low, PagSeguro’s upward climb signals promising days ahead fueled by a conducive business environment. Analysts foresee a steady 7-8% annual revenue growth on the horizon, coupled with a respectable 15-20% average annual earnings-per-share (EPS) expansion – a remarkable feat for a stock trading at a mere 11 times forward earnings.
The ripple effects of Brazil’s rate cuts are transforming into tailwinds for PagSeguro, evident in the robust 11.8% total payment volume (TPV) growth in Q4. The company’s micro-merchant TPV soared by 14% year-over-year in the same quarter, leveraging a novel mobile tap-on-phone solution. This strategic move, combined with TPV in merchant acquiring, culminated in a record R$27.6 billion in deposits, marking a 33% surge compared to the previous year. These promising metrics signal a luminous future for PagSeguro, underscoring the positive ramifications of ongoing rate cuts on Brazil’s fintech landscape.
Qifu Technology: A Strategic Marauder
Qifu Technology (NASDAQ: QFIN) emerges as a Chinese credit-tech pioneer offering comprehensive tech solutions for financial institutions, consumers, and small and medium-sized enterprises (SMEs) across the loan lifecycle. Despite a 57% slump from its peak in 2021, QFIN is staging a potential breakout after plateauing at March 2022 levels. Priced just above $18 currently, the stock exhibits promising signs that could catapult it beyond $20 in the near future.
QFIN’s recent Q4 performance showcased a robust 15% year-over-year revenue growth, surpassing estimates by 5.55%, accompanied by a solid 25% net margin. The company’s proactive move to unveil a new $350 million buyback program as of April 2024 underscores its commitment to bolster shareholder value. Trading at a modest 4.4 times forward earnings amidst prevailing China concerns, Qifu Technology touts a healthy balance sheet adorned with $590 million in cash against $113 million in debt. Additionally, the company’s 4.4% dividend yield coupled with substantial profit generation forecasts a bright outlook for investors eyeing this undervalued gem.
Embracing the Upswing in Online Betting Stocks
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Rush Street Interactive (NYSE:RSI) finds itself in a prolonged rangebound phase, reminiscent of a ship caught in a momentary lull before the prevailing winds return. The initial slide post-Covid boom dip now seems like a mere blip in the rearview mirror. Endowed with the provision of real-money online casino, online and retail sports betting, and social gaming services across the Americas, RSI is a powerhouse poised for significant expansion.
The share prices have rebounded impressively by 90% in the past year, painting a picture of a phoenix rising from the ashes. Forecasts predict a robust 15% revenue growth by 2024, while the stock’s modest valuation at just 0.56x forward sales hints at untapped potential. At 30x 2025 EPS, RSI stands as a bargain buy, especially with a projected 31% growth in 2026 and a promising trajectory of rapid expansion in the following years. The company’s 46% trouncing of EPS estimates in 2023 foreshadows a prosperous future with positive EPS expected by mid-to-late 2024.
Super Group (SGHC)
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Super Group (NYSE:SGHC) stands as another beacon in the online sports betting and gaming realm through its Betway and Spin brands. Riding the same wave of momentum as Rush Street, SGHC appears like a thoroughbred horse straining at the gates, primed for a breakthrough after meandering in a holding pattern for two years. Hailing from Guernsey, this global player is gearing up for a sprint. As one SeekingAlpha analyst rightly observed, SGHC is well-positioned to accelerate its growth to match the industry’s ~10% rate, especially with Canada edging towards online gambling legality.
Although analysts foresee nearly 100% EPS growth spanning 2024-2028 for SGHC, I’m inclined to believe that the company could shatter these expectations like a hitter smacking a grand slam. After all, its 322% surplus over the 2023 EPS projections offers a glimpse into the fireworks that might be in store down the road.
On the date of publication, Omor Ibne Ehsan 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.
