With so many enterprises – especially in the technology sphere – going stratospheric this year, investors may want to cool the temperature down with undervalued value stocks. Don’t get me wrong, it’s always fun to ride strength hoping that it will beget even more strength. Still, at some point, you want to be prudent.
With value stocks or assets that are trading at a lower price relative to their fundamentals, investors may be able to rotate their portfolios successfully. First, enterprises in this category tend to offer established businesses, with several facilitating passive income. Second, many retail investors continue to chase the flavors of the week, leaving behind many overlooked bargains.
For example, meme trades are again enticing market participants, which suggests that most investors just aren’t paying attention to the real deals. Use this dynamic to your advantage and target these undervalued value stocks.
Dick’s Sporting Goods (DKS)
While undervalued value stocks seem like a good deal, you’ve got to be careful because there could be a reason for their bargain rates. For example, take a look at Dick’s Sporting Goods (NYSE:DKS). A popular retailer for the active community, DKS has been a consistently solid performer. Unfortunately, its latest print for the second quarter wasn’t exactly up to snuff.
Subsequently, the severe drop in shares has led to DKS being down about 8% for the year. Still, as InvestorPlace contributor Joel Baglole argues, Dick’s could be an intriguing idea for the back-to-school boom. Even better, DKS trades at an attractive valuation right now.
According to investment data aggregator Gurufocus, DKS prints a forward earnings multiple of 9.15. In contrast, the sector median stat is a loftier 14.28. Further, while Q2 may have been a dud, Dick’s posts solid long-term sales growth and consistent profitability.
Finally, analysts peg DKS as a moderate buy with an average price target of $130.18, implying over 17% upside potential.
Formerly known as Raytheon Technologies, the defense contractor and aerospace specialist changes its name to RTX (NYSE:RTX). Will that mitigate any of the controversies that often tail the defense industry? Probably not. However, if you don’t mind putting your money into this space, RTX is awfully enticing due to its relevance.
I don’t want to talk too much about this topic but RTX undeniably represents a powerhouse in advanced weapons of modern warfare. You can just watch the news: battlefield tactics and strategies are changing as we speak, cynically benefitting RTX.
On a more uplifting note, RTX also commands significant implications for the burgeoning space economy. As McKinsey & Company reported earlier this year, this sector could hit $1 trillion by 2030. Given that RTX trades at a forward multiple of 13.43X – lower than the sector median of 17.33x – I’d say that it’s one of the undervalued value stocks. Lastly, analysts peg RTX as a moderate buy with a $94.23 price target, implying nearly 25% upside potential. It also features a dividend yield of 2.96%.
Myers Industries (MYE)
Based in Akron, Ohio, Myers Industries (NYSE:MYE) is a diversified material-handling business covering several industries. You get to that point when you read through the word salad about humility, commitment, and solutions. As a vital but less-appreciated enterprise, Myers is almost a perfect candidate for undervalued value stocks.
First, you’re looking at a company that enjoys business predictability. For example, its three-year revenue growth rate (per-share basis) comes in at 19.1%, above 85.91% of its peers. As well, Myers prints better-than-average profit margins. Given all that, it trades at a trailing earnings multiple of 12.78x, below the sector median’s 15.53x.
Just as well, Myers carries a forward yield of 3.08%. Enticingly, the payout ratio sits at just under 31%, providing confidence regarding yield sustainability. To close, Wall Street analysts peg MYE as a consensus moderate buy. Also, their average price target lands at $22, implying nearly 26% upside potential.
Clearway Energy (CWEN)
A company that thankfully gets to the point about what it does, Clearway Energy (NYSE:CWEN) is one of the largest renewable energy owners in the U.S. with over 5,500 net megawatts (MW) of installed wind and solar generation projects. Simple and direct, why can’t all enterprises explain their businesses so succinctly? Unfortunately, succinct does not equate to chart success.
Since the start of the year, CWEN slipped more than 22%. At the same time, you could argue – from a contrarian’s point of view – that it’s one of the undervalued value stocks to buy. From a financial perspective, CWEN trades at 4.73x free cash flow (FCF). In contrast, the sector median comes in at a loftier 9.64X.
Interestingly, Clearway provides a forward yield of 6.26%, which seems very attractive. However, do note that the payout ratio soars to 95.46%. Still, what I like here is that analysts peg CWEN as a moderate buy with a $33.80 price target, implying 36% growth.
Making a case for one of the most relevant among undervalued value stocks, FMC (NYSE:FMC) is a chemical manufacturing firm. Specifically, having spun off its lithium business, FMC now focuses on agricultural sciences. While it’s not nearly as sexy as undergirding the global electric vehicle rollout, the company is responsible for feeding the food supply chain. I’d say that’s more important.
Still, the disruption in the geopolitical space has not been kind to agriculture-related businesses. Since the January opener, FMC stock fell nearly 40%. However, the underlying entity could still be one of the top-value stocks. Presently, shares trade at a forward multiple of 10.58x, lower than the sector median of 11.38x.
Plus, to spice up the proposal, the company carries a forward yield of 3.08%. Just as well, the payout ratio sits at 31.88%, affording heightened confidence for yield sustainability. Turning to Wall Street, analysts peg FMC as a moderate buy with a $110.46 price target, implying nearly 47% growth.
A Canadian mining firm, B2Gold (NYSEAMERICAN:BTG) owns and operates gold mines in Mali, Namibia and the Philippines. Fundamentally, it’s easy to understand why B2Gold has become one of the undervalued value stocks. With the Federal Reserve struggling to arrest stubbornly high inflation, the rise of borrowing costs depresses commodity prices, all other things being equal.
However, not all things might be equal for B2Gold. Yes, BTG slipped more than 16% since the January opener. And yes, it is a risky venture. But as a gold play, the underlying enterprise may benefit from the fear trade. When the smelly stuff hits the fan, gold starts looking mighty good.
Just as well, B2Gold offers solid financials, especially for being a mining outfit. For example, the company prints excellent profit margins for the industry. And it trades at a price/earnings-to-growth (PEG) ratio of 0.38X, below the sector median of 0.94x. Looking at the Street, analysts peg BTG as a consensus strong buy. Their average price target hits $5.84, implying nearly 90% upside potential.
Superior Group of Companies (SGC)
An oddly named enterprise, Superior Group of Companies (NASDAQ:SGC) is a master at obfuscating its own business with word salad. Based on its website, it specializes in unlocking the power of brands by creating extraordinary experiences around brands. What? Per ChatGPT, Superior provides uniforms to various sectors, most noticeably the healthcare sector. Thanks, ChatGPT!
While nothing frustrates me more in this business than companies that fail to clearly identify their reason for being, it’s still one of the intriguing undervalued value stocks to speculate on. For example, SGC trades at a forward multiple of 8.89x, conspicuously lower than the 12.4x sector median.
And despite printing a three-year revenue growth rate of 14.2% (above 80% of rivals), SGC trades at only 0.64x trailing sales. In contrast, the sector median comes in at 0.83x. On a final note, analysts peg SGC as a consensus moderate buy. Moreover, their average price target stands at $14.50, implying over 94% upside potential.
On the date of publication, Josh Enomoto did not have (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.