While it may seem safer to bet on established companies, the thrill of discovering undervalued stocks that Wall Street is neglecting can be enticing. However, this approach is not without risk. These overlooked stocks may have strong fundamentals, but changing economic conditions can cloud their future prospects.
Playing it safe rarely leads to exceptional returns. To reap significant rewards, one must be willing to embrace risk. This philosophy holds true not just in investing, but in life. If you’re averse to financial adventures, these suggestions may not resonate with you. But for those who dare to take a chance, exploring undervalued stocks could offer promising opportunities.
Reassessing Taiwan Semiconductor (TSM)
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Even though the giant chip foundry Taiwan Semiconductor (NYSE:TSM) is not exactly flying under the radar, it endured substantial losses in the recent tech turmoil. Market conditions are grim, leading many to flee. Yet, this may be a misguided move.
Currently, shares of TSM trade at 11.28X trailing-year sales – a premium compared to the broader semiconductor industry. Analysts foresee a significant uptick in revenue, projecting sales to reach $86.22 billion by the end of fiscal 2024. If the price-to-sales multiple drops into the single digits, it could signal an opportune moment to reevaluate.
Reevaluating ASML (ASML)
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Despite being a prominent tech player, ASML (NASDAQ:ASML) took a hit during the recent tech sector turmoil. With shares trading at 11.58X sales, the current valuation is not excessively inflated relative to the industry average. Analysts anticipate sales to climb to $40.45 billion in the coming years, potentially restoring ASML to its former valuation.
Finding Potential in GigaCloud Technology (GCT)
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GigaCloud Technology (NASDAQ:GCT), a player in the infrastructure software sector, plummeted during the tech sector downturn. However, with shares trading at 1.27X sales, GCT could hold promise for investors. Analysts project sales to hit $1.08 billion by the end of fiscal 2024, signifying a potential uptrend.
Unveiling TotalEnergies (TTE)
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While not as in the spotlight as Chevron or Exxon Mobil, TotalEnergies (NYSE:TTE) stands out as an undervalued gem. Trading at 0.75X trailing-year sales, TTE is positioned favorably within the integrated energy sector. Analysts predict a modest uptick in sales by 2024, with a high-side estimate of $291.4 billion, which could drive the stock’s value even lower.
Undervalued Stocks: A Hidden Gem or Fool’s Gold?
Baytex Energy (BTE)
A Calgary, Canada-based energy firm, Baytex Energy (NYSE:BTE) is easily one of the overlooked undervalued stocks to consider. For one thing, the company specializes in the exploration and production component of the hydrocarbon value chain. Also known as upstream, this segment could see increased demand as geopolitical flashpoints threaten global energy supply chains.
Second, BTE stock trades hands at approximately 1.31X last year’s sales. That’s low compared to upstream oil and gas players, which run an average multiple of 1.97X. In Q3 of last year, the metric stood at 1.33X.
Here’s the kicker: analysts believe that by year’s end, revenue could soar to $2.82 billion. That’s up 41.5% from last year. Further, the high-side estimate calls for $3.12 billion. Assuming a shares outstanding count of 804.98 million, the projected revenue multiple comes in at 0.83X.
Another factor to consider is the passive income. At the moment, Baytex offers a forward dividend yield of around 2%. While that’s not much compared to the broader energy sector, the discount combined with the passive income makes Baytex an attractive idea.
Ferroglobe (GSM)
Headquartered in London, Ferroglobe (NASDAQ:GSM) is an interesting idea for adventurous investors seeking undervalued stocks. Per its public profile, Ferroglobe produces and sells silicon metal, along with silicon and manganese-based ferroalloys in the U.S., Europe and other international markets. These specialized chemicals are used in multiple industries, including healthcare and electronics.
Therefore, if you believe in the comeback potential of the innovation space, GSM stock should entice you. Right now, shares trade hands at 0.56X sales. That’s not bad considering that in the past year, the sales multiple averaged 0.55X. Also, in Q4 of last year, GSM traded hands at an average multiple of 0.72X.
Admittedly, analysts believe that in fiscal 2024, Ferroglobe will only achieve modest expansion – up 0.7% from last year. However, circumstances could get more exciting in the following year when revenue may potentially rise to $1.8 billion. Assuming a shares outstanding count of 187.88 million, GSM would be trading around 0.51X projected revenue.
Add in a forward yield of 1.07% and you have a quiet but compelling case for undervalued stocks to buy.
Alibaba (BABA)
One of the most intriguing but perhaps contentious ideas for undervalued stocks is Alibaba (NYSE:BABA). China’s flagship enterprise, Alibaba used to receive all kinds of positive attention. However, since the struggles of the Chinese economy, BABA stock has been trading in a flat consolidation phase. That has made the equity overlooked. Still, it could be a mistake to ignore it indefinitely.
Looking at data from McKinsey & Company, several aspects of the Chinese consumer economy are positive. With household savings sky-high in China compared to other regions, it’s possible that Alibaba could benefit. Right now, shares trade at 1.51X sales. That’s super high compared to the discretionary retail space overall. However, in the past year, the metric stood at 1.68X.
Also note that analysts believe fiscal 2025 (calendar 2024) sales could hit $142.4 billion. That would be up 9.7% from last year. Assuming a shares outstanding count of 2.38 billion, BABA stock is actually trading around 1.29X projected revenue.
That’s lower than the average seen at any point in the past five quarters. Therefore, BABA could be a buying idea right now.
