Market downturns can be gut-wrenching for traders, but at the same time, they bring a once-in-a-decade opportunity for investors to buy dirt-cheap stocks that can boost their portfolio's returns over the long term.
The stock is dirt cheap, trading at a price-to-sales ratio of 0.34, while other discount retailers like Walmart trades at 0.69 and e-commerce leader Amazon trades at a multiple of 1.89 times sales.
Wayfair is facing a massive growth opportunity in a very fragmented industry that is currently valued at $800 billion. With this much runway for growth, investors could see enormous gains off these lows. In fact, this might be the last chance investors have to buy the stock this cheap.
Amid a disastrous 2022 some analysts and market pundits are predicting a market rebound in late 2023 or 2024. Historically, market declines have given a golden opportunity for investors to pile into stocks before they rebound to higher valuations. As inflation begins to show signs of cooling in the US, the Federal Reserve might begin to ease monetary policy in 2023 and eventually halt rate hikes. In a Bloomberg survey, about 70% of the top global investors said they expected stocks to rise in 2023.
Despite the possible market situation in 2023 or beyond, the fact remains that successful investors always ignore short-term volatility when investing and pile into solid stocks when they are trading at lower prices. Sooner or later the stock market is expected to turn the corner. When it does, only those investors would come out as winners who had invested when things were bad.
Online course platform Coursera ranks 8th in our list of the best dirt cheap stocks to buy now. Coursera, Inc. (NYSE:COUR) has a long-term growth potential since it has a strong position in the online education market which is set to grow as more and more people opt to upskill themselves. Coursera, Inc. (NYSE:COUR) also collaborates with over 275 top universities and businesses to offer an online education.
Twelve stocks in the S&P 500, including Dish Network (DISH), Moderna (MRNA) and energy firm EQT (EQT), are cheap by current standards, trading for less than 10 times their adjusted earnings per share in the past 12 months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith. That's amazingly cheap if you consider the average stock in the S&P 500 trades for more than double that: 30 times earnings.
February's S&P 500 sell-off following a robust January reminded investors this market still faces plenty of turbulence, says Nicholas Colas of DataTrek Research. Some cheaper stocks might finally get some attention if investors pull back on the pricier investments that ran up already.
So far this year, only six of the top 10 performing S&P 500 companies even have a P-E. That's because four of the companies posted losses in the past four quarters. And get this: Two-thirds of the year's top 10 performing stocks this year that do have P-Es trade for higher valuations than the market. Take computer graphics-chip maker Nvidia (NVDA) as an example. Its stock is up nearly 60% this year, but it's trading for nearly 134 times its earnings.
The stock is cheap, but analysts insist it shouldn't be. They claim shares of the satellite broadcasting company should be trading for 28.40 each in 12 months. If they're right, that would mark nearly 160% in implied upside. That's the most bullish outlook analysts have on any stock with a valuation this low. So far this year, it's not working out. Shares are down more than 21% to 10.98.
Given Moderna's huge opportunity to apply mRNA technology to many lifesaving techniques, it's surprising to see it's such a cheap stock. It only trades 6.9 times trailing profit because profits have been so massive during the Covid-19 vaccination boom.
And while Moderna's stock is off 23% this year to 137.86, it's important to note it's still one of the top-performing S&P 500 stocks since the Covid-19 outbreak. And analysts are bullish. They're calling on Moderna stock trading for 222.06 a share in 12 months. If they're right, that's upside of 61%.
But again, the fundamentals are the reason the stock is cheap. Moderna is seen plunging to a loss of $2.24 a share in 2023 and another loss of $2.55 a share in 2024. The key with Moderna will be cooking up another breakthrough treatment and fast-track the return to profitability faster than 2026, which is what analysts are expecting.
It can be difficult to find great companies selling at truly dirt cheap valuations at the bottom of a market sell-off. Sometimes the best-performing stocks never get truly "cheap" at the bottom. But a stock is not cheap based on how low it trades compared to earnings, sales, or other metrics. What makes it a real bargain is how low the stock price is today versus what the company might be worth in the future.
There are several undervalued growth stocks that could deliver stellar returns off their current share prices. Here's why three Motley Fool contributors believe it's a great time to buy shares of RH (RH 1.83%), Live Nation Entertainment (LYV 1.12%), and Expedia Group (EXPE 2.14%).
RH stock made an almost unbelievable jump from the bottom of the 2020 market crash to its highs in the 2021 bull market, gaining 260%. That didn't last as shoppers began to pull back on extras, and it's now down 23% over the past year. At this price, shares trade at the incredibly cheap valuation of 12 times trailing-12-month earnings.
John Ballard (Live Nation Entertainment): While some of the best growth stocks will never look cheap by traditional valuation standards, Live Nation Entertainment is, indeed, an exceptional business selling for an unjustifiably low multiple to free cash flow.
Online travel stocks like Expedia also don't typically trade at bargain prices, but Expedia, which owns a wide range of brands including VRBO, Hotels.com, and Hotwire in addition to its namesake, is trading at a price-to-earnings ratio of just 11.5 based on earnings estimates for this year.
Jennifer Saibil has no position in any of the stocks mentioned. Jeremy Bowman has positions in RH and Target. John Ballard has positions in RH. The Motley Fool has positions in and recommends Target and Williams-Sonoma. The Motley Fool recommends Live Nation Entertainment, RH, and Wayfair. The Motley Fool has a disclosure policy.
Another compelling factor boosting VIPS as one of the top cheap stocks to buy centers on its balance sheet. Specifically, it has a cash-to-debt ratio of 6.44, above the sector median of 0.49 times. Also, its Altman Z-Score pings at 4.62, indicating low bankruptcy risk. Finally, Wall Street analysts peg VIPS as a consensus moderate buy. Their average price target stands at $15.93, implying nearly 7% upside potential.
Despite these powerful stats, Core Molding remains one of the cheap stocks to consider. Primarily, the market prices CMT at a trailing multiple of 11.62. As a discount to earnings, Core ranks better than 64.17% of the chemicals industry. Also, CMT trades at 0.37 times sales. Here, the company beats out nearly 87% of the field. Notably, Core offers stakeholders a fairly stable balance sheet. In particular, its Altman Z-Score pings at 4.11, again indicating low bankruptcy risk.
Still, for hardened speculators, TrueBlue could be an interesting opportunity among cheap stocks. Right now, the market prices TBI at a trailing multiple of 9.15. As a discount to earnings, the company ranks better than 78.09% of the business services sector. Additionally, TBI trades at 0.26 times (trailing) sales. Here, the company ranks better than 89% of its rivals. For prospective investors, TrueBlue enjoys decent stability in the balance sheet. In particular, its Altman Z-Score hits 4.03, indicating fiscal resilience. In closing, analysts peg TBI as a consensus moderate buy. Their average price target stands at $21, implying over 23% upside potential.
Notably, Kiniksa represents an incredibly profitable enterprise. Its net margin is 83.28%, outpacing 97.47% of the competition. Finally, Wall Street analysts peg KNSA as a unanimous strong buy. Their average price target stands at $21.50, implying almost 94% upside potential. With so much support, KNSA could be one of the cheap stocks to buy.
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Looking for dividend payers unlikely to slash pay-outs? A significantly overvalued equity may cut its dividend should the share price revert to fair value, and a dirt cheap stock with an attractive yield is simply a illusion of maths. So we screened for UK stocks with a dividend yield of 3% or more and that is trading on our around fair value.
United Utility's balance sheet is filled with cheap debt financed for 30 or more years, which should boost returns on equity for many years. Regulated operations are improving, increasing the likelihood that the water utility will meet regulatory incentive targets. This should reduce the likelihood of incurring regulatory fines.
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