Top 11 Undervalued Stocks for August 2024

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Over the course of many years, undervalued stocks have demonstrated superior performance compared to growth stocks. However, for the last decade and a half, growth stocks have surged ahead, except for a brief period in 2022 when rising interest rates affected their upward trend. This lengthy era of undervaluation suggests that value stocks might again rise to the top.

Early 2024 has seen a modest advantage for value stocks, despite media buzz around high-growth giants such as Nvidia. For those considering investment strategies, these shifts present interesting considerations. Consulting with a financial advisor about a diversified portfolio that includes value stocks could be beneficial for sustained investment growth.

If you’re interested in exploring undervalued stocks to potentially boost your portfolio, we’ve compiled a comprehensive list for you. These stocks have been carefully selected based on various criteria, including favorable price-earnings ratios, promising growth potential, and expert ratings.

Exploring Top Undervalued Stocks in August 2024

Diving deeper into the metrics behind these companies can be insightful before any investment. While the companies featured here scored high in initial screenings, this list is intended to highlight potential opportunities rather than provide specific purchasing advice.

1. PayPal Holdings (PYPL)

• Market capitalization: $61.66 billion
• Next-year earnings growth estimate: 10.10%
• Trailing P/E: 14.612
• Dividend yield: N/A
• Industry: Financial services
• One-year target price: $77.52

PayPal Holdings has faced significant price declines over the past few years after experiencing a surge during the pandemic. As the competition grows and margins tighten, the company’s stock reflects these challenges. Nonetheless, analysts foresee a resurgence, with an anticipated one-year gain of about 29%.

2. Adobe (ADBE)

• Market capitalization: $228.50 billion
• Next-year earnings growth estimate: 13.30%
• Trailing P/E: 46.43
• Dividend yield: N/A
• Industry: Software
• One-year target price: $611.30

With technology stocks continuing to have high valuations, Adobe appears promising to its investors. Despite a substantial drop of over 40% in 2022, the stock has garnered a value designation among observers. The company boasts an extensive economic moat, leading to optimistic expectations for earnings growth over the next five fiscal years.

3. Entergy (ETR)

• Market capitalization: $25.02 billion
• Next-year earnings growth estimate: 7.10%
• Trailing P/E: 13.98
• Dividend yield: 3.74%
• Industry: Utilities
• One-year target price: $117.45

Utility companies, including Entergy, usually exhibit low P/E ratios and stable growth profiles, making them attractive during economic fluctuations. Analysts anticipate future gains and increased interest in utility stocks as growth stocks face high multiples and potential rate declines.

4. Honda Motor Co. (HMC)

• Market capitalization: $47.26 billion
• Next-year earnings growth estimate: 1.10%
• Trailing P/E: 6.39
• Dividend yield: 4.45%
• Industry: Auto manufacturers
• One-year target price: $38.78

Like its industry peers, Honda has navigated pandemic-era challenges. With recent positive earnings reports, there is hope for recovery. Investors still benefit from a low valuation and a considerable dividend yield.

5. Beazer Homes USA Inc. (BZH)

• Market capitalization: $819.94 million
• Next-year earnings growth estimate: 15.70%
• Trailing P/E: 5.08
• Dividend yield: N/A
• Industry: Homebuilders
• One-year target price: $39.25

Operating predominantly in the southern and western U.S., Beazer Homes benefits from favorable real estate trends. The company’s developments in single-family and multifamily units are key growth drivers.

6. Ternium S.A. (TX)

• Market Capitalization: $6.31 billion
• Next-year earnings growth estimate: 18.41%
• Trailing P/E: N/A
• Dividend yield: 9.99%
• Industry: Steel manufacturing
• One-year target price: $48.11

Ternium operates in a cyclical and competitive field of steel fabrication, resulting in a modest valuation. With a target price anticipated to offer significant returns, Ternium is a potential choice for investors seeking European business exposure and high dividends.

7. Federal Realty Investment Trust (FRT)

• Market capitalization: $9.441 billion
• Next-year earnings growth estimate: 9.80%
• Trailing P/E: 32.85
• Dividend yield: 3.91%
• Industry: Real estate
• One-year target price: $114.50

In the realm of real estate investment trusts, factors beyond P/E ratios, such as price-to-funds-from-operations ratios, are more telling. FRT’s focus on attractive retail and mixed-use properties has prompted positive analyst outlooks for this sector.

8. Albemarle (ALB)

• Market capitalization: $9.91 billion
• Next-year earnings growth estimate: 232.20%
• Trailing P/E: N/A
• Dividend yield: 1.86%
• Industry: Specialty chemicals
• One-year target price: $123.48

With notable expansion in the specialty chemicals market and a solid dividend, Albemarle is poised for substantial growth. Analysts are optimistic about the near-term potential for earnings continuation and share price increases.

9. Dow Inc. (DOW)

• Market capitalization: $35.87 billion
• Next-year earnings growth estimate: 45.20%
• Trailing P/E: 31.59
• Dividend yield: 5.38%
• Industry: Specialty chemicals
• One-year target price: $58.47

As a key component of the Dow Jones Industrial Average, Dow’s prospects hinge on the global economy. With predictions of 14% stock gains alongside a notable dividend, this makes Dow a compelling choice for growth-seeking investors.

10. Tyson Foods (TSN)

• Market capitalization: $22.49 billion
• Next-year earnings growth estimate: 40.80%
• Trailing P/E: N/A
• Dividend yield: 3.20%
• Industry: Food
• One-year target price: $60.67

Tyson Foods is a household name, and its wide array of brands fosters the company’s growth. Coupled with projected earnings increases and a compensatory dividend, Tyson represents a potentially stable addition to a diverse portfolio.

11. U.S. Bancorp (USB)

• Market capitalization: $64.26 billion
• Next-year earnings growth estimate: 9.50%
• Trailing P/E: 13.07
• Dividend yield: 4.63%
• Industry: Banking
• One-year target price: $49.72

As a prominent U.S. banking player, U.S. Bancorp draws in those seeking value investing. With a competitive P/E ratio, robust growth predictions, and an attractive payout, the bank appeals to various investor interests.

Understanding the Risks of Investing in Undervalued Stocks

Investing in undervalued stocks comes with inherent dangers, the first being that a stock’s low valuation aligns accurately with its performance. Despite a low P/E ratio, a stock might be accurately priced by the market due to systematic earning struggles or potential insolvency risks. As a second caution, undervalued designations can linger, keeping a stock’s valuation low for longer than anticipated.

Strategic Tips for Investing in Undervalued Stocks

Before acquiring undervalued stocks, conduct thorough research. To navigate potential pitfalls, consider these steps:

• Conduct Personal Research: Go beyond analyst opinions to craft a picture of a company’s finances.
• Insight into Industry Dynamics: Industry trends can dictate stock performance as much as internal earnings.
• Identify Undervaluation Causes: Recognize underlying conditions that justify a stock’s valuation.
• Timing for Investment: Dive in strategically to avoid stagnation, waiting for catalysts if necessary.
• Risk Management: Put an exit plan in place to protect your investment.
• Leverage Chart Analysis: Use charts to identify favorable support zones for price movements.

Exploring Methods to Discover Undervalued Stocks

A variety of indicators can signal a stock below its intrinsic value. Standard ratios include P/E, price-to-sales, and price-to-book, each representing a stock’s price versus specific company metrics. As of August 5, 2024, our selected stocks present low valuations across these metrics.

While these stocks might captivate value investors, caution should be exercised. Factors such as heavy debt, an ailing industry, or geographic instability might be responsible for an undervalued share price.

Good to Know

For diversified exposure without in-depth research, consider index funds like the S&P 500 or Russell 2000. These funds replicate the performance of their underlying indexes, offering a balance by avoiding underperformance but also sacrificing the chance for market-beating returns.

Thomas Streissguth and Daria Uhlig contributed reporting to this article.

Information accurate as of August 5, 2024, and subject to change.

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