Undervalued stocks to buy now
People buy stocks for one reason – to make money when the share price goes up. The problem, though, has always been finding stocks that have the potential to enjoy huge increases in the share price. What better stocks to do so than those that are being undervalued? An undervalued stock simply means that it is being bought below its actual value. Soon enough, the market always catches up and begins to appreciate such stocks, and you had better been already holding some of these stocks. Through the best trading brokers, you can always get your hands on some undervalued stocks and get what brought you here.
What are considered undervalued stocks?
By definition, undervalued stocks are those whose current market value is lower than their fair value. Market value is the current stock price, while the fair value is the company’s intrinsic value based on fundamentals. In finance, fair market value is the value of a product determined by how someone is willing to pay for it. In the context of stock trading, therefore, fair market value would represent the price someone would be willing to pay for a stock. For example, a stock may be trading at $50 but the company shows so much promise behind it that a potential buyer is willing to part with as much as $75 for it. In such a case, the fair market value would be $75 while the current market value would be $50. If a stock’s fair market value is higher than the current market value, that stock is considered undervalued. As we have discussed on BuyStocksEasy, there are many types of stocks, and these are referred to as value stocks.
Now, of course investors are not going to invest in a company based on abstract value – they need solid figures backed by evidence. Over the years, many experts have come up with various ways of determining the fair market value and identify undervalued stocks. One giant, Warren Buffett, described the intrinsic value of a business as the sum of cash flows over the entirety of the business discounted at an appropriate interest rate. By this definition, an investor must try to predict a company’s future profits and future interest rates. In doing so, you can prove what a buyer is willing to pay for the stock. A sure way of finding this out is by calculating the price-to-earnings (P/E) ratio.
To realize the P/E ratio, divide the market value price per share by the earnings per share (EPS). The current market value is easy enough to find – just google the company! However, the EPS can be in two forms – based on past performance or future predictions. EPS based on past performance is that which you often find on finance websites like BuyStocksEasy. On the other hand, predicted EPS is announced by a company during its earnings release. That could be quarterly or annually; either way it works.
Depending on the EPS used, you can either get a forward or trailing P/E ratio. Investors more often use the trailing EPS because they would rather not trust the predictions made by a company just to gain investors. In cases where a company is experiencing losses and there are no earnings, the P/E ratio is expressed as ‘N/A’. When a company has a low P/E ratio, its stock is seen as undervalued because the EPS is high.
Most undervalued stocks to buy now
If you can use the knowledge above to search for value stocks offered by the best trading brokers, you will always find undervalued stocks that you can invest in like Warren Buffett and make good money. We constantly analyze stocks at BuyStocksEasy so you don’t have to, and here are some undervalued stocks for you to look at and add into your portfolio. These are just 3 stocks you can buy through the best trading brokers:
Late last year, the Wall Street Journal ran a piece indicating that companies were having problems shipping products in the US. Indeed, demand for trucking services surged to all-time highs in 2018. Nevertheless, the earnings reports don’t seem to reflect this reality. EPS for Cummins Inc. was 21% lower in 2018 than 2017. Meanwhile, operating profits are up, but they have not received a lot of media attention. This is one of the main reasons why a stock becomes undervalued – because the market is yet to catch up to it.
There’s more – Cummins is head and shoulders above its competition. A chart of the average for return on invested capital (ROIC) in the industry shows Cummins beating the rest of the industry. That is because it sells its engines to its would be competitors who can’t build their own engines such as Volvo, Navistar, and Paccar. Add to that, they are also working on electric semis, and theirs seem even more promising than Tesla’s. Tesla had initially promised to begin production this year, but this deadline was pushed forward to 2020 as Tesla usually does. But Cummins seems to be on track to building their first electric semis this year already, ahead of Tesla. Moreover, people tend to forget that Cummins has a diversified business beyond engines into industrial components and power generators.
All of these positions the company well above the rest in many ways, enough to promise huge returns. With a share price of about $132 and EPS of $13, a 10 P/E ratio means that Cummins is very undervalued and could be a wonderful value investment.
In the consumer electronics industry, this company is performing slightly above the industry average. The P/E ratio following the announcement of the Q4 financial results was 8.61. Some investors have even used the P/S ratio, replacing EPS with sales for a more reliable figure, and the result is the same. While the EPS is only slightly above average, Sony has a greater earnings outlook. The company suffered lower sales in smartphones and cameras in 2018, causing revenues not to reach market estimates.
All the same, Sony is fixing to rebound in value thanks to new product additions. A refresh in the smartphone offerings and the console business could mean that the company regains its glory. Furthermore, the company’s share price has been declining for a long time, and the stock may be oversold. At BuyStocksEasy, this particular stock is of strong interest with huge potential now that it is so undervalued.
When the Q4 earnings report was announced, the company had a $65.81 share price and $2.21 EPS placing the P/E ratio at almost 30. That may seem high, but in the industry this is actually lower than average, already indicating signs of undervaluation. The share price has also been declining, but this has been due to the decision to cut dividends in half. The company has been focused on the acquisition, which of course takes a toll on a company. Many institutional investors have already taken note of the lucrative position BUD is in, and they have been increasing their long bets on the company lately.
The current state of the company should not be a worry to a value investor, because it just presents an attractive time to invest. Anheuser-Busch InBev has a global presence with a firm hold in the largest beer markets. Therefore, despite what things look like presently, you can be sure of some major upsets to come.