The 7 Most Deeply Undervalued Stocks on Wall Street Right Now
The stock market has clearly hit a fork in the road. On one path, we find the high-flying tech and growth stocks that have rapidly recovered or even exceeded their pre-pandemic highs. On the other, more treacherous trail, many deeply undervalued stocks still wallow below their former glory.
I believe now presents a golden moment to pick up shares of sturdy businesses on the cheap before a rising tide lifts these boats, too. Just as I advised buying into the downtrodden tech sector back in 2022, it pays to scoop up the deeply undervalued stocks poised for their own comeback.
Nearly two years later, many retail investors have missed out on the impressive tech rebound since mid-2022. But opportunities abound for those willing to take a contrarian view. Let’s take a look!
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Block (SQ)
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I am very bullish on Block (NYSE:SQ) moving forward, as many catalysts are aligning in its favor. First and foremost, the company is finally profitable after many investors viewed Block as a faster-growing yet unprofitable alternative to PayPal (NASDAQ:PYPL). However, now that Block is generating profits, not only is this company expanding at a quicker pace, but it is also producing earnings. These profits are projected to increase rapidly in the upcoming years, with its EPS expected to triple from 2024 to 2030 alongside solid double-digit revenue growth down the line.
In addition, Block has $6 billion in debt that will weigh less heavily on its balance sheet once interest rates decline. That will also free up substantial cash flow. Block is well-positioned to gain significantly from the current boom in the crypto market since the business has built up meaningful exposure to blockchain technology. With its profitable operations, scaling revenues and leveraged position in crypto, I believe Block is easily one of the most deeply undervalued stocks at the moment and can produce multibagger returns over a multi-year period.
Liberty Broadband (LBRDA)
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Liberty Broadband Corporation (NASDAQ:LBRDA) is a communications firm that possesses major assets in the industry. However, broadband expansion has been tepid in recent years. Furthermore, Charter Communications (NASDAQ:CHTR), another business it has a sizable stake in, is also struggling to expand its broadband network. Charter only added 155,000 broadband subscriptions for all of 2023, about 10% of its prior rate. Consequently, LBRDA’s stock price has plunged 40% from its Oct. 2023 peak.
Nonetheless, I believe now is an optimal time to buy at a discount, as I don’t anticipate broadband connections will substantially decline over the long term. The government is allocating substantial capital to develop broadband infrastructure and 5G. Most importantly, Liberty Broadband owns a 26% stake in Charter Communications worth $18 billion at year-end, yet it trades at a massive discount to that value, with a $8 billion market cap. This significant discount, along with accretive buybacks funded by selling CHTR shares, makes LBRDA very inexpensive relative to its net asset value.
Stanley Black & Decker (SWK)
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Stanley Black & Decker (NYSE:SWK) is a diversified industrial firm that manufactures tools, storage solutions, digital automatic doors, healthcare products and industrial goods. The stock has plunged 58% from its 2021 peak and is far below pre-pandemic values. One primary reason for Stanley Black & Decker’s steep decline is its high debt level following several major acquisitions in recent years.
However, I believe the stock will inevitably rebound to pre-pandemic prices and beyond once interest rates fall. That would enhance cash flow and make the business much more attractive. EPS is expected to climb from $4 to $7 from 2024 to 2026, alongside steady mid-single-digit annual revenue growth during that period.
We also can’t overlook that an infrastructure and construction boom has commenced in the U.S. That will naturally increase demand for the company’s tools.
Leggett & Platt (LEG)
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Leggett & Platt (NYSE:LEG) has certainly seen some challenging years lately, as discretionary purchases like furniture haven’t exactly been flying off the shelves. However, I believe this diversified manufacturer is positioning itself for better days ahead. With the economy returning to normalcy, Leggett & Platt is expected to resume expanding earnings starting in 2025, likely followed by steady annual revenue growth in the low-single digits.
The stock trades at just 0.6 times forward sales and 17 times forward earnings, which are very inexpensive valuations for a stock with an 8.95% dividend yield. Near-term cash flow guidance is somewhat weak, but I do not think there is substantial downside risk from here. The long-term upside potential far outweighs the limited downside risks.
Leggett & Platt is focused on maintaining its investment-grade credit rating. The dividend was sustained for a 52nd consecutive year, quite a feat. Once residential demand turns around, I expect Leggett & Platt will be ready to capitalize on the improved environment. Patient investors could be rewarded handsomely.
inTest (INTT)
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inTest (NYSEAMERICAN:INTT) is a technology company that provides test solutions for semiconductor manufacturers. Its products help test integrated circuits and system-level testing. This is a smaller company than many featured in this article. However, I believe the upside potential here is significant.
Semiconductor stocks have been booming for over a year, and smaller semiconductor companies have also been performing well. InTest is one of these smaller semiconductor firms, and it now sits 57% off its June 2023 highs. I believe it is bottoming out for the next leg up and could produce multibagger returns from here.
InTest continues to make solid progress despite broader semiconductor industry headwinds. Gross margins expanded both sequentially and year-over-year. While the trend in bookings slowed in Q3, management sounded optimistic on the earnings call about near-term demand drivers in automotive and computing.
It trades at just 12 times forward earnings and 1 times sales, which are very inexpensive metrics for a semiconductor company, even with slower growth. It has $42 million in cash against $18 million in total debt, providing substantial flexibility. I believe landing contracts with major semiconductor players could send it soaring.
Betterware (BWMX)
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Betterware (NASDAQ:BWMX) is a direct-to-consumer company operating a home product portfolio in Mexico. It manufactures and distributes innovative home organization products and storage solutions through a unique two-tier household-to-household selling model. The company is seeing near hyper-growth levels of top-line expansion.
Betterware exceeded Q4 earnings and revenue forecasts and analysts now expect over 35% growth next quarter. It beat revenue estimates by 13%. Once interest rates eventually ease, profits could outpace expectations even more. The 5.8% dividend yield also appears sustainable given the current trajectory and leading industry position. With just a 4% market share in Mexico, Betterware has ample room to expand further domestically. The 61% decline from its peak indicates significant rebound potential once Betterware regains momentum. It is definitely one of the most deeply undervalued stocks you can get your hands on.
GeoPark (GPRK)
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Oil prices have held up very well recently, thanks to constant OPEC+ supply cuts and robust oil demand. I expect oil to stay elevated unless a black swan event triggers a recession. Increased pressure on Middle Eastern and Russian oil being sold by third parties will likely keep prices high.
GeoPark (NYSE:GPRK) is an independent oil and gas exploration and production company operating in Latin America, primarily in Colombia, Ecuador, Chile, Brazil and Argentina. It has declined from its pre-pandemic price of around $20 per share to just above $9. I believe this represents a great value, as most negatives appear priced in. The 6.43% dividend yield also sweetens the deal. It trades at 3.3 times forward earnings and 0.7 times forward sales. Analysts anticipate 23% EPS growth in 2024 and 10% the following year. Thus, I think there is significant upside if oil remains elevated.
On the date of publication, Omor Ibne Ehsan did not hold (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.
Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.
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