5 Undervalued Stocks with Upside Potential
Identifying and investing in undervalued stocks is a cornerstone strategy for investors looking to maximize returns while minimizing risks. An undervalued stock is one that trades for less than its intrinsic value, often due to market overreactions, short-term challenges, or overlooked potential by the majority of investors. By investing in these stocks, investors can buy into quality companies at a discount, setting the stage for significant gains as the market eventually recognizes the true value of these assets. This approach not only provides a margin of safety but also enhances the potential for above-average returns, making it a crucial tactic in the arsenal of value investors aiming to build wealth over the long term.
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The following are a few examples for those looking to capitalize on companies with good foundations but potentially undervalued stocks.
Undervalued Stocks with Upside Potential
*Figures provided below were accurate at the time of writing and are subject to change. Any potential investor should verify metrics*
1. Comcast
| Market Cap | Forward P/E 1 Yr. | Earnings Per Share(EPS) |
| 172,140,297,072 | 9.92 | $3.72 |
What Comcast Does: Comcast Corporation, through its subsidiary NBCUniversal, is a global media and technology company with three primary businesses: Comcast Cable, NBCUniversal, and Sky. Comcast Cable is one of the United States’ largest video, high-speed internet, and phone providers to residential customers under the Xfinity brand.
NBCUniversal is involved in news, entertainment, and sports cable networks, the NBC and Telemundo broadcast networks, television production operations, television station groups, Universal Pictures, and Universal Parks and Resorts. Sky is one of Europe’s leading entertainment companies, providing video, high-speed internet, voice services, and wireless phone services.
Why Its Stock Is Undervalued: Comcast’s stock may be undervalued due to a combination of factors, including solid financial performance, significant free cash flow, and strategic investments in growth areas like high-speed internet and streaming services. Despite the challenges in a saturated market, Comcast has demonstrated resilience with increasing returns on capital and attractive free cash flow margins. The stock is perceived to be trading below its intrinsic value, considering future revenue and EPS growth projections.
At the time of writing, CMCSA is listed by the majority of analysts as a ‘Strong Buy‘.
Why It’s a Good Investment: Comcast may be considered a good investment for several reasons. First, its diversified business model, spanning across broadband, content, and theme parks, provides a strong foundation for steady revenue and growth. The company’s commitment to investing in technology and content to enhance its competitive position further bolsters its long-term prospects. Additionally, Comcast’s ability to generate significant free cash flow supports its ability to pay dividends, reinvest in its businesses, and reduce debt.
The stock’s undervaluation, combined with the company’s solid financial health and growth prospects, makes it an attractive option for investors looking for value and growth.
2. Verizon Communications
| Market Cap | Forward P/E 1 Yr. | Earnings Per Share(EPS) |
| 166,461,440,545 | 8.57 | $2.76 |
What Verizon Communications Does: Verizon Communications is a leading global telecommunications, information, and technology provider. It operates through two segments: Verizon Consumer Group and Verizon Business Group. The Consumer segment offers wireless and wireline communication services and products, including broadband, video, and other services. The Business segment provides wireless and wireline services and solutions, including networking, security, and managed services to businesses and governmental entities worldwide.
Why Its Stock Is Undervalued: Verizon’s stock may be considered undervalued due to several factors. The company has shown robust operational performance, notably in the broadband sector, with a significant increase in subscribers. Despite the challenges posed by a high level of debt, Verizon has managed to maintain strong free cash flow, which supports its capital allocation priorities, including dividends. The stock’s current trading levels, significantly below some fair value estimates, suggest potential for price appreciation.
At the time of writing, VZ is listed by the majority of analysts as a ‘Buy‘.
Why It’s a Good Investment: Verizon stands out as a good investment for a few key reasons. Its substantial dividend yield, supported by a sustainable payout ratio, appeals to income-focused investors. Operational strengths, such as subscriber growth in the broadband sector and accolades for network quality, underscore its competitive position. Additionally, Verizon’s focus on managing debt and solid free cash flow profile signal financial health and operational efficiency.
With the stock potentially being undervalued, investors can gain from potential market adjustments to reflect the company’s intrinsic value and long-term growth prospects.
3. Estee Lauder
| Market Cap | Forward P/E 1 Yr. | Earnings Per Share(EPS) |
| 53,380,275,334 | 67.15 | $1.30 |
What The Estée Lauder Companies Do: The Estée Lauder Companies Inc. is a global leader in the prestige beauty industry. It manufactures, markets, and sells a wide range of skin care, makeup, fragrance, and hair care products. The company’s portfolio includes well-known brands like Estée Lauder, Clinique, M·A·C, Bobbi Brown Cosmetics, and many others. Estée Lauder products are sold in over 150 countries and territories, with a strong presence in department stores, specialty-multi retailers, upscale perfumeries and pharmacies, and through its own and authorized retailer websites.
Why Its Stock Is Undervalued: The stock is potentially undervalued due to its comprehensive product lineup and strong global footprint in the prestige beauty market. Estée Lauder has maintained a strong financial profile despite macroeconomic challenges, with solid earnings and revenue growth. The company’s focus on high-margin categories, such as skincare and luxury brands, and its strategic investments in digital and e-commerce platforms are expected to drive long-term growth. Furthermore, the company’s ability to innovate and expand its product offerings while navigating market volatilities underscores its resilience and potential for stock appreciation.
At the time of writing, EL is listed by the majority of analysts as a ‘Buy‘.
Why It’s a Good Investment: The company’s strong brand portfolio and global market presence provide a competitive edge in the growing global beauty industry. Its strategic focus on digital transformation and expanding its footprint in emerging markets are key drivers of future growth. Estée Lauder’s commitment to innovation and sustainability aligns with consumer preferences and could enhance its brand equity and customer loyalty over the long term.
While the company faces challenges such as fluctuating consumer spending patterns and intense competition, its strategic initiatives, solid financial health, and robust growth prospects make it an attractive investment, especially considering its current undervaluation.
4. Charles Schwab
| Market Cap | Forward P/E 1 Yr. | Earnings Per Share(EPS) |
| 122,542,866,939 | 20.07 | $2.54 |
What Charles Schwab Does: Charles Schwab is a leading financial services company that offers a broad range of services, including brokerage, banking, and financial advisory services across the United States and internationally. It provides wealth management, securities brokerage, asset management, custody, and financial advisory services, catering to individual investors and institutional clients.
Why Its Stock Is Undervalued: Charles Schwab boasts solid earnings performance, limited competition in the brokerage service market, consistent core net new asset growth, and double-digit profit margins. Analysts have positive expectations for the company’s earnings per share in the coming year, and estimates are rising. Despite challenges such as interest rate-driven pressures on deposits and net interest margin, Charles Schwab maintains a strong brokerage franchise with significant earnings power and asset-gathering capabilities. These factors suggest that the stock could be valued higher based on its earnings potential.
At the time of writing, SCHW is listed by the majority of analysts as a ‘Buy‘.
Why It’s a Good Investment: Looking ahead to FY 2024, Charles Schwab anticipates a normalization of the interest rate landscape, which could lead to a reversal of cash flows back into its core business, thereby achieving higher earnings. The company’s fourth-quarter earnings report surpassed expectations, highlighting solid profit margins and impressive core net new asset growth. Charles Schwab’s ability to attract assets, even in challenging market conditions, underscores its strength as a brokerage firm. These attributes, combined with its valuation being perceived as a value stock, make Charles Schwab a compelling investment opportunity.
5. Federal Realty Investment Trust
| Market Cap | Forward P/E 1 Yr. | Earnings Per Share(EPS) |
| 8,284,099,516 | 14.56 | $2.80 |
What Federal Realty Investment Trust Does: Federal Realty Investment Trust is a recognized leader in the ownership, operation, and redevelopment of high-quality retail-based properties located primarily in major coastal markets from Washington, D.C., to Boston, as well as San Francisco and Los Angeles. With a foundation dating back to 1962, the company’s mission focuses on delivering long-term, sustainable growth by investing in communities where retail demand outstrips supply. Federal Realty’s expertise includes creating vibrant, mixed-use neighborhoods such as Santana Row in San Jose, Pike & Rose in North Bethesda, and Assembly Row in Somerville.
Why Its Stock Is Undervalued: As of the latest analyses, Federal Realty Investment Trust’s stock is perceived to be undervalued by about 20%. This undervaluation may stem from its solid foundation in prime coastal markets and a strong track record of delivering on its redevelopment projects, which the broader market could potentially overlook. The company’s performance, characterized by exceeding analyst expectations in full-year earnings and maintaining a steady pace of dividend payouts, underscores its financial health and resilience.
At the time of writing, FRT is listed by the majority of analysts as a ‘Strong Buy‘.
Why It’s a Good Investment: Federal Realty Investment Trust offers several appealing attributes for investors. Its focus on high-quality retail and mixed-use properties in areas with a high demand for retail space provides a solid foundation for stable and sustainable growth. The trust’s consistent history of dividend payouts and its strategy of investing in growth through redevelopment and community-building positions it well for long-term value creation. Furthermore, its current undervaluation presents a potentially attractive entry point for investors looking to capitalize on the company’s growth trajectory and stable income through dividends.
With a diversified portfolio in prime locations and a strategy focused on long-term growth, Federal Realty stands out as a compelling investment in the real estate sector.