The P/E ratio of the S&P 500 has risen to almost 29—almost twice its historical normal of 15. This shows that investors are eager to buy stocks and bet on the continued strength of large-cap companies. However, this excitement isn’t the same in every area. While artificial intelligence (AI) and other hot growth industries get all the attention, many good companies with less exciting business models or short-term problems are being ignored and are selling at low prices.
This difference creates a one-of-a-kind chance for smart buyers. Undervalued stocks have two benefits: they protect you from losses and have a lot of room to go up in the long run. If these things describe your financial plan, you’re in for a treat. Come with me as we look at six large-cap stocks that are currently cheap and are the best stocks to buy now. These stocks not only have bright futures but also have strong valuations.
How We Chose These Undervalued Stocks
Using a strategy is important for finding undervalued stocks. The PEG ratio and related earnings multiples like price-to-earnings (PE) and price-to-sales (PS) can show when a stock is undervalued. Each of these measures gives a different picture of a company’s financial health, but using them all together gives a full picture.
For this selection, we employed three primary screening metrics:
- PEG Ratio Below 2:This makes sure that the stocks we look at have strong earnings growth compared to their price.
- Forward PE Ratio Less Than 20:This helps find stocks that are priced fairly based on how much money they will make in the future.
- Target Price Upside Above 16%:This means that the price will go up.
Using these screens led to a big list of possible prospects. We focused on the top 10 stocks by market value to make sure that this list had a mix of strong, well-known companies. To keep things interesting and avoid duplication, we didn’t include companies that did the same thing. For example, Disney (DIS), Alibaba (BABA), and Pfizer (PFE) all met our standards, but they were not included because they were too similar to Comcast (CMCSA), PDD Holdings (PDD), and Johnson & Johnson (JNJ).
The last list has a variety of sectors and cheap large-cap stocks. The smallest company on the list has a market value of $116 billion. This method ensures that there is a good mix of stars in the field who are ready to grow. If you’re interested in smaller businesses, check out our list of small-cap value stocks. Our list of the best value stocks for 2024 also gives you more opportunities to spend.
6 Top Undervalued Stocks to Buy in August 2024
Finding undervalued stocks can be a great way to make much money in the ever-changing world of stock investing. A few stocks stand out in August 2024 based on their Price/Earnings to Growth (PEG) ratio, forward P/E ratio, and big price targets for growth. Here is a full explanation of six of the best stocks to invest in 2024. Corporate data, Tradingview.com, and Stockanalysis.com, were used to do this analysis. All of these stocks, except Pinduoduo (PDD), pay a dividend, and four of them have yields above 2%.
1. Johnson & Johnson (JNJ)
Stock Overview
- Stock price: $145.56
- PEG:0.89
- Forward PE ratio: 13.53
- Price target: $171.77
- Price target upside:18%
- Dividend yield: 3.4%
Johnson & Johnson Business Overview
Johnson & Johnson (JNJ) is a global healthcare company known for making a wide range of healthcare items, such as medicines, medical devices, and consumer health goods. Their products and services are used by many people, including stores, dealers, hospitals, and clinics. This wide reach in the market shows how important the company is in the healthcare field.
Why JNJ Stock Is A Top Choice
- Solid Product Portfolio: JNJ has a strong range with many market-leading goods in various healthcare areas. This variety helps the business keep making money and prevents it from relying too much on any one product line.
- Proven Product Development Practice:JNJ has a long history of coming up with new ideas. It continues to do this by releasing new and useful healthcare products, which solidifies its place as a market leader.
- Strong Free Cash Flow Performance:The company has a lot of free cash flow, which allows it to reinvest in growth prospects, pay dividends, and handle its debt well.
- Healthy Balance Sheet:JNJ keeps its balance sheet strong, which is important for dealing with unstable markets and growing spending in the future.
- Increasing Dividend:JNJ’s promise to keep raising its income shows that it is financially stable and wants to give owners more value.
Even with these benefits, JNJ’s stock price has dropped more than 6% since January. This drop is mostly because of ongoing legal problems with its talc powder goods. Tens of thousands of cases have been filed against JNJ, saying that its baby powder includes asbestos, which can cause cancer. To lessen these debts, J&J has tried to move these claims to a subsidiary and then file for bankruptcy for that company.
Legal Challenges and Recent Developments
The legal fights involving JNJ’s talc powder have been a major source of anxiety for investors. Lawsuits have been filed against the company, saying that its baby powder includes asbestos, which is dangerous. In order to deal with these debts, J&J put them in a division and filed for bankruptcy for that company. A federal judge recently decided in favor of JNJ, which means that the company’s bankruptcy procedures can continue. This choice only partially solves the problem, but it does get rid of a big problem. JNJ has also agreed to pay$700 million to settle lawsuits brought by state attorneys general.
Getting these legal issues resolved would likely boost investor trust, which could cause JNJ’s stock price to rise again. JNJ is still a great choice for investors looking for a safe and promising healthcare stock because it has strong prospects, a good dividend yield, and the potential for a big gain.
2. PDD Holdings (PDD)
Stock Overview
- Stock Price:$135.78
- PEG Ratio:0.57
- Forward P/E Ratio: 13.26
- Price Target: $202.85
- Price Target Upside: 49%
- Dividend Yield: N/A
Business Overview
PDD Holdings is the parent company of popular e-commerce platforms Temu and Pinduoduo. But even though big companies like Alibaba and JD.com are in the same business, PDD Holdings has made a place for itself. The company used to be based in China, but in 2023, it moved its home to Ireland.
Why PDD Stock Is A Top Choice
People know PDD Holdings for coming up with new ways to get people and make new sales. Temu’s social media efforts, for example, encourage people to buy in bulk and save money. In contrast, Pinduoduo buys fresh food directly from farms to save money and pass the savings on to customers. People have said that these tactics make PDD look like a young Amazon, which shows that it has much room to grow. PDD Holdings is a great choice for investors looking for potential e-commerce stocks because it has a good growth history and a fair price.
3. Comcast (CMCSA)
Stock Overview
- Stock Price:$37.85
- PEG: 0.81
- Forward PE Ratio:8.65
- Price Target: $46.94
- Price Target Upside: 27%
- Dividend Yield:3.3%
Comcast Business Overview
Comcast provides a wide range of services, such as high-speed internet and wireless internet, for homes and companies. Through its NBCUniversal company, it also offers movies and TV shows, streaming entertainment, and theme park rides.
Why CMCSA Stock Is a Top Choice
Comcast has always done well financially. From 2021 to 2023, the company had record sales, adjusted EBITDA, and adjusted EPS. The trend continued into the first quarter of 2024 when the company beat estimates for both sales and earnings per share.
Even with these great results, Comcast’s stock price has dropped more than 13% this year. The drop is mostly due to worries about losing cable customers and money on its Peacock streaming service.
Peacock is quickly getting more members and users, but this will need ongoing funding. Suppose investors are ready to look past these short-term problems. In that case, Comcast’s stable internet business, strong free cash flow generation, attractive 3.3% dividend yield, and large share-buying activities will be good for them.
4. ConocoPhillips (COP)
Stock Overview
- Stock Price: $112.31
- PEG:0.72
- Forward PE Ratio:12.29
- Price Target: $144.50
- Price Target Upside:29%
- Dividend Yield:2.1%
ConocoPhillips Business Overview
ConocoPhillips is one of the biggest companies that finds oil, natural gas, and natural gas liquids and moves them. The company has both unusual and traditional sources in its holdings. Unconventional resources, which are extracted using high-tech methods like fracking and directed drilling, show how creatively ConocoPhillips develops resources.
Why COP Stock Is A Top Choice
In November 2023, J.P. Morgan experts predicted that the energy markets would experience a big supply-demand gap that would last well past 2025. This means that energy prices will likely continue to rise. This prediction is based on unstable politics in places like Russia and the Middle East, along with rising demand in the US.
As oil prices rise, ConocoPhillips stands to gain. Energy prices have been going up since early June, even though they have been going up and down a bit this year. In the past, COP stock has gone up along with these price rises, but it hasn’t done that lately. This suggests that the stock could go up later in the year.
They think that ConocoPhillips will have an EPS of $8.93 in 2024, up from $8.77 the previous year. This expected growth, along with the fact that COP is currently undervalued, makes it an attractive investment for people who want to take advantage of the way the energy sector is changing.
5. Anheuser-Busch InBev (BUD)
Stock Overview
- Stock Price:$59.67
- PEG:0.93
- Forward PE Ratio:17.24
- Price Target:$71.28
- Price Target Upside: 19%
- Dividend Yield: 1.1%
Business Overview
Anheuser-Busch InBev is a world leader in drinks. It makes, markets, and sells more than 500 different types of beer and other drinks. Budweiser, Corona, Stella Artois, Michelob Ultra, and Skol are some of the most important names. The company does business in the Americas, Europe, the Middle East, Africa, and the Asia-Pacific region, among other places.
Why BUD Stock Is a Top Choice
Anheuser-Busch InBev has a huge world presence and a large part of the market. When you combine these strengths with excellent business performance, you get strong cash flows and income. The company’s EBITDA grew by 7% to $19.98 million in 2024, even though its sales fell by 1.7%. A big U.S. boycott of Bud Light in 2023 played a role in this drop, and its effects are still being felt today.
As part of its business plan, Anheuser-Busch InBev will go digital to make buying easier for both stores and customers, pay down debt, and move toward its green goals. With these steps, the company is set up to continue growing and making money.
6. United Parcel Service (UPS)
Stock Overview:
- Stock Price: $135.83
- PEG Ratio:1.79
- Forward PE Ratio: 15.23
- Price Target: $161.60 (Upside: 19%)
- Dividend Yield: 4.8%
Business Overview:
UPS is a global leader in transportation and logistics services, operating extensively in the U.S. and internationally.
Why UPS Stock Is A Top Choice:
UPS had problems in 2023 because fewer packages were delivered than planned, and there could have been problems with workers. But starting in March 2024, and led by CEO Carol Tome, the business has set big goals for sales, operating profits, and free cash flow over the next three years. If UPS meets these goals, which include big increases in sales and cash flow, the stock price now is a great deal.
Through strategic efforts like robotics, which are meant to cut costs, UPS has shown that it is committed to operating efficiency. The company has also grown into higher-margin areas, such as healthcare services, which has helped it make more money.
Key Investment Points:
- Operational Improvements: UPS has been focusing on making the company more efficient and making more money under CEO Tome’s “better not bigger” and “better and bolder” strategies.
- Dividend Yield:UPS has the best dividend yield of all the stocks we talked about, at a nice 4.8%. This makes it a good choice for buyers who want steady gains on their money..
Bottom Line
Undervalued stocks combine downside protection with significant long-term upside potential. Many of these companies, including those highlighted in this list, also offer attractive dividends. This dividend income provides investors with ongoing returns while they wait for the stock’s undervaluation to correct and its potential to materialize.
