These stocks have cheap valuations with good growth rates and their prices are at a trough level for the cycle
- The stocks you can’t ignore have cheap valuations, good growth rates and significantly higher price targets.
- ZipRecruiter (ZIP): This recruiting company shows large growth rates, yet the stock is cheap.
- Tripadvisor (TRIP): This company claims to be the largest travel company in the world and analysts project earnings will more than double next year.
- Universal Electronics (UEIC): This fast-growing consumer electronics company is forecast to show earnings growth of 25.7% next year.
- JPMorgan Chase (JPM): Analysts expect the bank to have 12% earnings growth next year.
- Ford (F): The carmaker is expected to grow despite fears of a recession and it currently has a cheap valuation.
- Verizon (VZ): Verizon is still in growth mode and it has a solid dividend yield, alongside a reasonable valuation.
I am writing today about six stocks you can’t ignore if you want to make money this year. These stocks are now very cheap in terms of valuation. Yet their growth rates are still intact.
Moreover, there is good reason to believe that these stocks are near their trough prices for the cycle. This is because there have been several downturns in the stock.
As well, the companies are still making their dividend payments. As a result, these stocks are now near the highest dividend yield in the past several years. Each company could also buy back large amounts of its stock and their buyback yields are high.
Among this group of stocks you can’t ignore, the average price-to-earnings multiple for 2023 is 9.4x and the average dividend yield is 2.06%.Source: Mark R. Hake, CFA
Moreover, these are still growth companies. Analysts may lower their future growth forecasts for these stocks. However, their average earnings growth forecast for 2023 is 32.5%. This shows that these companies are still projected to produce positive earnings for the foreseeable future.
Let’s dive in and look at these stocks.
Zip Recruiter (NYSE:ZIP) is a very interesting stock in that its growth rate is high, but its valuation is not excessive. Moreover, the company is also buying back a large number of shares.
In fact, analysts now project earnings-per-share this year of 84 cents, up from 2 cents in 2021. And for 2023, the average forecast is for $1.21 per share, up 44% YoY. That puts ZIP stock on a forward P/E multiple of just 14x earnings, down from 20x of the 2022 earnings forecast.
Moreover, the company announced on March 1, 2022, that it would buy back $100 million worth of its shares. That represents 5% of its total market value at today’s price.
However, in Q1 alone the company bought back $62 million of its shares in that quarter alone. If it keeps this up ZipRecruiter could end up buying back over $248 million of its shares annually. That works out to 12.4% of its total market value.
We will see what happens when the company releases its Q2 report in August. Nevertheless, it appears the stock is very cheap, given its growth rate and the huge amount of shares that are being repurchased. This is the direct result of a large free cash flow generation by the company. That could push the stock even higher and makes it one of the stocks you can’t ignore.
Tripadvisor (NASDAQ:TRIP) is a profitable online travel company that claims to be the world’s largest travel site. It is also growing very quickly. But TRIP stock is not very expensive based on forecasts for earnings for 2023. Moreover, it is down 35% YTD and could be at a trough.
For example, its Q1 revenue was up 113% YoY. Moreover, its free cash flow finally turned positive in Q1. Tripadvisor reported that its FCF was now $72 million. Moreover, it now had about $738 million in cash and equivalents, as of March 31. That represents almost 30% of its market value.
As a result, analysts now forecast earnings will reach 79 cents per share this year and 105% more at $1.62 next year. That puts the stock on a forward multiple of 23.4x this year and 11.4x next year.
Analysts now have an average stock price target of $26.88 per share, according to TipRanks’ survey of 9 analysts. This is over 47% more than today’s price.
Universal Electronics (UEIC)
Universal Electronics (NASDAQ:UEIC) is a consumer electronics company that makes remotes for TV sets, voice-activated smart home hubs, smart thermostats and home sensors. It also makes related cloud-related software to control these devices online.
Here is the appeal for bargain investors: The company’s earnings are growing quickly, but the stock has a very inexpensive valuation. Moreover, the stock is down over 33% YTD, so it may be reaching a trough, especially if the recession is not as bad as feared.
For example, analysts now forecast earnings to reach $2.92 per share this year and grow by 25.7% to reach $3.67 EPS in 2023. That puts UEIC stock on a forward 2022 multiple of 9.2x and 7.4x for 2023. This is very cheap for such a fast-growing company.
Moreover, 3 analysts surveyed by TipRanks have an average price target of $46. That represents a potential upside of 70% over today’s price.
JPMorgan Chase (JPM)
JPMorgan Chase (NYSE:JPM) is a major money center bank and its stock is now down 29% YTD. Its Q2 earnings came in at $2.76 per share. This was 15 cents lower than analysts’ EPS forecasts of $2.91.
Nevertheless, analysts still forecast EPS of $11.19 for 2022 and $12.57 for 2023. That puts JPM stock on a forward 2022 price-to-earnings ratio of 10.3x and 9.1x for 2023. It assumes earnings will grow by over 12% in 2023.
JPMorgan pays a $4 dividend, but it is likely to raise that dividend soon. It will likely raise the dividend by the end of September. JPM stock has a dividend yield of 3.49%, which is higher than its historical dividend yield over the last four years (2.76%). If JPM had that yield now, the price would be $144.93. That gives it a price target 26% higher than today.
That also coincides with the TipRanks survey of 19 analysts who have an average price target of $140.21. That is 21% over today’s price.
Ford (NYSE:F) is in the process of transforming into an all-electric car manufacturer. It is planning on splitting off its electric car holdings into a separate company.
Since F stock is down over 41% YTD, the stock is very cheap. Its average P/E for this year is just 6.7x, based on analyst estimates taken by Seeking Alpha.
Its 2023 forward P/E multiple is just 6.3x. This is based on earnings growth forecasts of 5.7% next year.
Ford pays a dividend of 10 cents per quarter or 40 cents annually. So, at $12.82 per share, its dividend yield is 3.12%. Moreover, Ford can clearly afford the dividend. It is just 25% of analysts’ 2022 forecast of $1.59 EPS, and 20.8% of 2023 $1.92 forecasts.
In fact, TipRanks’ survey of 18 analysts results in an average price target of $16.49. That represents an upside of over 38% from today.
Verizon (NYSE:VZ) is spending heavily to build out its 5G platform. But it is still growing its earnings and free cash flow. Right now, analysts forecast its earnings to rise by 1.8% to $5.51 per share in 2023, up from $5.41 this year.
This puts VZ stock on a forward P/E multiple of just 8.2x this year, and 8.1x in 2023. Moreover, its $2.56 annual dividend is still less than half of the company’s earnings (47%). It also gives the stock an annual dividend yield of 5.76%.
This yield is much higher than its average over the past four years, or 4.42%. In fact, if the price had the same yield now, it would be much higher.
For example, if by dividing the $2.56 dividend by the 4.42% average yield, the price target is $57.92. The upside is, therefore, 30% over today’s price. This makes it one of the best bargain growth stocks.