3 Undervalued Stocks Investors Can Buy Now
One very effective way to find winning stocks is to utilize Zacks Premium Screens. They apply custom search variables and can assist in identifying stocks that fit a variety of investment objectives like value, momentum, growth, income and more. Today, I consulted the Undervalued Zacks #1 Rank Stocks screener.
Vipshop VIPS, Graphic Packaging Holding Company GPK, and Toll Brothers TOL all boast a Zacks Rank #1 (Strong Buy), and forward P/E ratios at 10x or below.
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Vipshop
Vipshop is a leading online discount retailer based in China. Established in 2008, Vipshop has grown into a prominent e-commerce platform that offers high-quality branded products at discounted prices to a large and loyal customer base.
Through its innovative flash sales model, Vipshop collaborates directly with brand partners to provide a wide range of fashion, beauty, home, and lifestyle products to consumers. VIP’s success lies in its ability to cater to the evolving consumer preferences in China's fast-growing e-commerce market.
VIP stock has put up a strong, albeit volatile performance over the last decade. However, the last two years were particularly challenging, as the extended Chinese lockdown slammed sales growth and the stock experienced a brutal correction.
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That correction has created an exceptional opportunity for savvy investors though, and the stock now trades at a very reasonable valuation and enjoys upward trending earnings revisions.
In the chart below we can see that earnings estimates have moved sharply higher since the beginning of 2023. Current quarter earnings estimates have been revised higher by 31.4% over the last two months and are projected to climb 24.3% YoY. Additionally, FY23 earnings estimates have been upgraded by 17.6% and are expected to grow 25% YoY.
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Vipshop is trading at a one-year forward earnings multiple of 10x, which is below the market average of 20x, and below its 10-year median of 18x. With such strong earnings growth and a below average valuation, VIPS appears to be quite attractive.
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Graphic Packaging Holding Company
Graphic Package Holding Company is a prominent and dynamic multinational corporation that specializes in providing innovative packaging solutions to various industries. With a strong global presence and a history dating back several decades, GPK has established itself as a leader in the packaging industry. The company's comprehensive portfolio encompasses a wide range of packaging products, including corrugated containers, folding cartons, displays, and labels.
GPK has been an incredibly steady performing stock over the last decade compounding at an annual rate of 14.2% annually and significantly outperforming the industry.
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Graphic Packaging Holding Company has also experienced some nice earnings estimate upgrades giving it a Zacks Rank #1 (Strong Buy). Current quarter earnings have been revised higher by 7% and are expected to grow 28.3% YoY. FY23 earnings have been boosted by 10.2% over the last two months and are projected to climb 30% YoY. 3-5 EPS growth is projected to be 25% annually.
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GPK is trading at a 10-year low in terms of forward earnings multiples. At just 8x one-year forward earnings it is well below the industry average of 13x, and its 10-year median of 16.5x. To make it even more appealing the stock offers a dividend yield of 1.6%, which has been increased by an average of 10% annually over the last three years.
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Toll Brothers
Toll Brothers is a renowned and highly regarded home construction company operating in the US. Founded in 1967, Toll Brothers has established itself as a premier builder of luxury homes, catering to affluent customers seeking exceptional quality, craftsmanship, and design. TOL specializes in developing and constructing a diverse range of residential properties, including single-family homes, townhomes, and condominiums, in desirable locations on land it develops and improves.
Homebuilder stocks have been particularly strong over the last year thanks to the shortage of housing in the US. Toll Brothers has rallied and incredible 83% over the last year, far outperforming the broad market and performing in line with the industry.
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With analysts unanimously upgrading earnings estimates across timeframes TOL enjoys a Zacks Rank #1 (Strong Buy). Current quarter earnings have been revised higher by 31%, while FY23 have been revised higher by 22.5% and FY24 nearly 30% over the last two months.
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TOL, like the others is trading at a very reasonable valuation. Currently trading at a one-year forward earnings multiple of 7.1x, TOL is trading below the the industry at 10.4X, and below its 10-year median of 10.7x. TOL also offers a dividend yield of 1.1% and has diligently bought back shares, reducing the share count by 40% over the last 10 years.
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Conclusion
Finding winning stocks doesn’t have to be hard. By utilizing Zack’s proprietary research investors can find highly appealing stocks on a daily basis.
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Toll Brothers Inc. (TOL) : Free Stock Analysis Report
Graphic Packaging Holding Company (GPK) : Free Stock Analysis Report
Vipshop Holdings Limited (VIPS) : Free Stock Analysis Report
