As an economic recovery in the United States begins to roll, investors are increasingly shifting from remote lifestyle stocks to undervalued candidates that have the potential to rebound significantly as the economy moves into higher gear. The switch to long-overlooked value stocks by investors is expected to continue for the foreseeable future. According to a report in Bloomberg, “The global value stock gauge has jumped 22% since Nov. 6, while the equivalent growth index is up just 8%.”
Investors accelerated shift to value stocks is evidenced by the SPDR Portfolio S&P 500 Value ETF’s (SPYV) 4.7% and 10.6% returns over the past month and past three months, respectively. This compares to the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 3.7% loss and 0.8% gain over the past month and past three months, respectively.
So, we believe it could be wise to invest in fundamentally sound undervalued stocks now before they attract more investor attention. With respect to this, good targets are Cigna Corporation (CI), Koninklijke Philips (PHG), AGCO Corporation (AGCO), and Penske Automotive Group, Inc. (PAG). These names have delivered decent returns over the past year but are still undervalued. The companies have strong business models, which are exposed to a rebounding economy, which suggests that they will advance in the coming months.
Cigna Corporation (CI)
CI sells insurance products and services in the medical, dental, life, and other segments. The company has worldwide operations. CI has gained 71.2% over the past year to close Friday’s trading session at $243.26.
The company recently added Iora Health to its expanding Medicare Advantage network. It recently sold its group life, accident, and disability insurance businesses to New York Life for $6.3 billion.
In terms of non-GAAP forward price/earnings, CI is currently trading at 12.01x, which is 50.36% lower than the industry average 24.19x. In terms of non-GAAP forward price/sales, CI is currently trading at 0.52x, which is 93.58% lower than the industry average 8.04x.
CI’s revenue is expected to increase 5% for the quarter ended March 2021 and 3.6% in 2021. Its EPS is expected to rise 9.8% in 2021 and 10.4% per annum over the next five year.
CI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary ratings system. The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance. The POWR Ratings also evaluate stocks by various components such as Value, Momentum, and Quality.
CI has an A grade of A for Value, and B for Growth and Quality. In the B-rated Medical – Health Insurance industry, it is ranked #1 of 10 stocks.
In total, we rate CI on eight different levels. Beyond what we’ve stated above we have also given CI grades for Sentiment, Stability, and Momentum. Get all the CI ratings here.
Koninklijke Philips (PHG)
PHG is a diverse technology company that is involved in the lighting, healthcare, and consumer well-being sectors. The company conducts business globally. PHG’s stock has returned 73.7% over the past year and closed the last trading session at $57.09.
PHG recently unveiled artificial intelligence (AI)-enabled workflow solutions for diagnostic X-Rays. The company has partnered with the Dutch development bank FMO to expand universal health coverage in Africa.
PHG’s non-GAAP forward price/earnings of 26.07x is 7.78% lower than the industry average 24.19x. Its forward price/sales of 2.22x is 72.44% lower than the industry average 8.04x. And its EPS is expected to grow at a rate of 4.1% every year for the next five years.
It’s no surprise that PHG has an overall B rating, which equates to Buy in our POWR Ratings system. PHG has an A grade for both Value and Stability, and B for Sentiment. In the Medical - Devices & Equipment industry, it is ranked #38 of 183 stocks.
Beyond what we’ve stated above we have also given PHG grades for Growth, Momentum, and Quality. Get all the PHG ratings here.
AGCO Corporation (AGCO)
AGCO designs, manufactures, and markets agricultural machinery. The company’s portfolio of products includes tractors, combines, forage equipment, and more. AGCO’s stock price has increased 25.1% over the past year and its last closing price was $143.91.
AGCO recently released the fifth generation of its popular Valtra A Series of tractors with several new features. The company has partnered with Geringhoff to develop new combine harvester header technologies.
AGCO’s non-GAAP forward price/earnings is currently at 19.83x, which is 10.4% lower than the industry average 22.13x. In terms of non-GAAP forward price/sales, AGCO is currently trading at 1.05x, which is 33.22% lower than the industry average 1.58x.
The company’s revenue is expected to grow 14% for the quarter ended March 31, 2021 and 12% in 2021. Its EPS is expected to grow 29.6% in 2021 and 21.9% annually over the next five years.
It’s no surprise that AGCO has an overall B rating, which equates to a Buy in our POWR Ratings system. AGCO has an A grade for Value, and B for Sentiment. In the Agriculture industry, it is ranked #7 of 31 stocks.
Beyond what we stated above we have also given AGCO grades for Stability, Growth, Quality, and Momentum. Get all the AGCO ratings here.
Penske Automotive Group, Inc. (PAG)
PAG owns and operates automotive and commercial truck dealerships. The company has operations primarily in the United States and Western Europe. PAG’s stock price has risen 268.9% over the past year and its closing price was $81.5 last Friday.
The company recently rebranded its U.S,-based vehicle SuperCenters, renaming them CarShop from CarSense previously. It has also entered an agreement to acquire Kansas City Freightliner, a retailer of medium- to heavy-duty commercial trucks.
PAG’s 10.78x non-GAAP forward price/earnings ratio is 44.43% lower than the industry average19.4x. The company’s 0.28x non-GAAP forward price/sales ratio is 78.82% lower than the industry average 1.32x.
PAG’s revenue is expected to rise 10.7% for the quarter ended March 31, 2021 and 15% in 2021. Its EPS is expected to rise 12.3% in 2021 and 9.1% per annum over the next five years.
The POWR Ratings are also high on PAG; t has an Overall Rating of A, which translates to a Strong Buy. PAG also has an A grade for both Value and Momentum, and B for Growth. In the B-rated Auto Dealers & Rentals industry, it is ranked #1 of 25 stocks.
Beyond what we’ve stated above we have also given PAG grades for Stability, Sentiment, and Quality. Get all the PAG ratings here.
The POWR Ratings are calculated by considering 118 different factors with the weighting of each optimized to improve overall performance.
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CI shares were trading at $241.92 per share on Monday morning, down $1.34 (-0.55%). Year-to-date, CI has gained 16.70%, versus a 4.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaryaman Aashind
Aaryaman is an accomplished journalist that’s passionate about providing in-depth insights about investing and personal finance. Recently he has been focused on the stock market and he specializes in evaluating high-growth stocks.
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