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2 Bargain Stocks You Can Buy Right Now

Tim Brugger, The Motley Fool

With the Dow nearing 25,000, there is no shortage of stocks that are on a tear. Despite the high-flying stock market, inevitably there are a few stocks that get lost in the shuffle. Two of those, HP (NYSE: HPQ) and Cisco (NASDAQ: CSCO), have also performed admirably but remain bargain stocks you can buy right now.

Both HP and Cisco offer outstanding value with the added benefit of paying shareholders a dividend yield well above their peers. Better still, the two tech behemoths are positioned to end the year on a strong note and keep the positive momentum heading into 2018, and beyond.

Two open HP OMEN laptops back to back on a table.

Image source: HP.

There's a plan for that

Though HP's shift in business focus isn't as dramatic as Cisco's, CEO Dion Weisler's answer to the "dying" PC market continues to work wonders.

HP is focusing its development and marketing efforts strategically. The new-ish virtual reality (VR) ready OMEN PCs are an ideal example of HP's go-to-market strategy. The OMEN, with its advanced VR capabilities, is designed for the world's gamers and is one reason HP's PC unit is outperforming most pundits' expectations.

Personal systems revenue was up 13% to $9.1 billion in HP's fiscal Q4 2017, led by an eye-popping 16% gain in notebook sales to $5.4 billion. Desktop PC growth wasn't far behind, rising 10% to $2.82 billion. Impressively, HP saw its PC shipments increase 4.4% year over year, according to Gartner, and was the only manufacturer to record a gain in shipments.

Not only has HP's approach of focusing on niche markets boosted its PC unit, but the same strategy resulted in a return to growth of every segment within its once-problematic printing unit. Perhaps most indicative of HP's sales approach was the 10% jump in its largest printing segment, supply sales, to $3.13 billion. For some perspective, in 2016's fourth quarter supply revenue sank 12%, leading to an 8% drop in HP's printing unit. HP's new automated printing-supply ordering system is already helping to drive supply sales.

Despite its strong quarter and year, HP is trading at just 14.5 times trailing-12-month earnings, while its peer average stands at 21.9. And HP stock is valued at a meager 11.7 times forward earnings. The topper is the 2.5% dividend yield HP pays its shareholders, considerably higher than its competitors' 1.5% average payout. Add it all up, and HP is an ideal bargain stock for value and income investors.

Vehicles including a train, garbage truck, and plane, with a net of connected pictograms superimposed on top.

Image source: Getty Images.

The winds of change

It's been two and half years since Chuck Robbins took the reins as CEO of Cisco. Robbins made it clear from day one that Cisco would no longer rely on enterprise network switches and routers. Instead, Cisco is delivering cloud security, infrastructure as a service (IaaS), the Internet of Things (IoT), and software solutions to reach its ultimate goal of building a foundation of recurring revenue.

In conjunction with rolling out new offerings, the company aims to pare overhead. Cisco is delivering on each of its objectives but remains a bargain stock. At 19.9 times past earnings, Cisco is valued significantly below its peer average of 35.9. Cisco's 2.9% dividend yield handily beats its peers' 2.2% average.

Though the $12.1 billion in revenue Cisco generated last quarter was a 2% decline year over year, operating expenses declined 7% to $4.67 billion. The end result was a 4% increase in earnings to $0.48 a share. With an expected return this quarter to top-line growth of 1% to 3%, Cisco should continue improving its bottom line.

As for building its revenue foundation, Cisco's recurring revenue climbed 3% last quarter and now sits at 32%. That means $3.87 billion of Cisco's total sales are reliable, and relatively predictable, recurring revenue. Though it's sometimes gotten lost in the shuffle, Cisco's recurring revenue growth has become a theme with each passing quarter.

Sure, Cisco stock is up 26% in 2017, while HP is up 44%, but that simply speaks to how woefully undervalued both were. The fact Cisco and HP remain bargains is icing on the cake for investors who haven't gotten on board. The good news is, there's still time to snag two bargain stocks, each with an industry-leading payout.

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Tim Brugger has no position in any of the stocks mentioned. The Motley Fool recommends Cisco Systems and Gartner. The Motley Fool has a disclosure policy.