There is an ocean of listed stocks and its impossible for an investor to have all quality names in the portfolio. Often, there are fundamentally strong stores that are under-the-radar. When these undiscovered stocks come to the limelight, the upside is sharp and multi-fold. The focus of this column is on stocks that represent companies that are largely unnoticed or ignored by investors.
In recent times, Nvidia (NASDAQ:NVDA) was among the hottest stocks. Investors continued to buy the stock on the fear of missing out on a bigger rally. After trading at highs of $974, NVDA stock has corrected to current levels of $800. I am not suggesting that the stock will not trend higher again. However, investors who bought near 52-week highs would be sitting on significant losses.
The key lesson is to buy ideas when it’s sideways or lower. Not when the ideas are in the limelight and already overvalued. Undiscovered stocks provide that valuation comfort. Additionally, when the upside comes, the rally is likely to be significant.
Let’s discuss seven undiscovered stocks to buy before they skyrocket.
Alamos Gold (AGI)
Alamos Gold (NYSE:AGI) is among the undiscovered stocks to buy for multibagger returns. Gold has been trending higher on rate cut expectations and heightened geopolitical tensions. I expect the trend for the precious metal to remain positive. Alamos Gold, as a quality gold miner, is well positioned to benefit from higher realized gold prices.
Besides being bullish on gold, there are other reasons to be positive on Alamos. The Company has high-quality gold assets with an average mine life of Canadian operations at 18 years. Alamos has continued to expand its assets through acquisition with the most recent being Argonaut Gold for a consideration of $276 million.
For 2024, Alamos has guided for production of 505,000 ounces of gold. The Company has a long-term production potential of 800,000 ounces of gold. With steady production upside coupled with higher realized prices, the Company is likely to deliver robust cash flows.
It’s also worth adding here that for the year, Alamos expects all-in-sustaining-cost of $1,150 an ounce. By 2026, the Company has guided for AISC of $1,050 an ounce. With a declining cost profile, EBITDA margin expansion will sustain even if gold remains sideways.
Genpact Limited (G)
Genpact (NYSE:G) is another under-the-radar stock that deserves attention. G stock has trended lower by 28% in the last 12 months and trades at a forward price-earnings ratio of 10.6. Valuations look attractive for this 1.93% dividend yield stock.
As an overview, Genpact is a professional services firm with presence in more than 30 countries. The Company’s Data-Tech-AI services are utilized by industries that include banking, healthcare, insurance, consumer goods, among others. For 2023, Genpact reported revenue of $4.48 billion.
With artificial intelligence being applied across industries for efficiency and cost saving, Genpact is well positioned to accelerate growth. The Company is a provider of AI services (including generative AI). Further, Genpact has also been assisting clients globally in providing automation assistance services.
Therefore, with presence in key technology areas, Genpact is positioned for value creation. I must add that the business is a cash flow machine. Genpact has been creating value for investors through healthy dividend growth and share repurchase.
Aker BP ASA (AKRBF)
Aker BP ASA (OTCMKTS:AKRBF) stock remains undiscovered largely due to the fact that it trades on the OTC exchange. I can say with some conviction that Aker BP can be a multibagger in the coming years. As an overview, Aker BP is an oil & gas exploration company with focus on the Norwegian Continental Shelf.
AKRBF stock has been largely sideways in the last 12 months. The reason is weakness in oil prices on the back of macroeconomic headwinds. This consolidation is a good opportunity to accumulate the undervalued stock offering an attractive dividend yield of 9%.
As of 2023, Aker BP reported 2P reserves of 1.72 billion barrels of oil equivalent. Further, the Company had 810 million BOE in 2C resources. It’s worth noting that the Company’s assets have a low break-even. The entire portfolio break-even is estimated at $35 to $40 per barrel. Therefore, even with oil at $80 per barrel, Aker BP is positioned to deliver robust cash flows.
To put things into perspective, Aker reported revenue and EBITDA of $3.1 billion and $2.8 billion respectively for Q1 2024. For the same period, the Company’s operating cash flow was $1.5 billion.
Nomad Foods (NOMD)
Nomad Foods (NYSE:NOMD) stock has traded sideways for the last 12 months. This is s good accumulation opportunity with NOMD stock trading at a forward price-earnings ratio of 9.8. I would not be surprised if the stock doubles in the next 24 months. Further, NOMD stock offers a dividend yield of 0.8%.
As an overview, Nomad Foods is Western Europe’s leading frozen food company. For 2023, Nomad Foods reported revenue growth of 4.9% on a year-on-year basis to 3 billion euros. For the same period, the Company reported adjusted EBITDA of 535 million euros. At the same time, adjusted free cash flow was 300 million euros. With robust cash flows, Nomad Foods initiated dividends in 2023.
In terms of guidance, Nomad Foods is targeting long-term revenue growth of 3% to 4%. Further, adjusted EBITDA growth is likely in the range of 5% to 7%. With 90% to 95% adjusted free cash flow conversion, it’s likely that dividend growth will be robust in the coming years. This will translate into stock re-rating.
Leonardo DRS (DRS)
Leonardo DRS (NASDAQ:DRS) stock has been in an uptrend. However, the emerging name from the defense sector remains largely unnoticed. At a forward price-earnings ratio of 26.8, DRS stock is attractive for fresh exposure.
It’s worth noting that global defense spending surged by 6.8% on a year-on-year basis to $2.44 trillion. This does not come as a surprise as global geopolitical tensions escalate. I expect defense spending to continue increasing and Leonardo DRS is well positioned to benefit.
Leonardo DRS is a provider of defense products and technologies. The Company’s focus is on areas of advance sensing, network computing, force protection, electric power & propulsion. For the last financial year, the Company reported revenue and EBITDA of $2.8 billion and $324 million respectively.
It’s worth noting that since listing in November 2022, the Company’s order backlog has swelled by 2.5x to $7.8 billion. With increasing defense spending, I expect the order intake to remain robust. This will translate into accelerated revenue and EBITDA growth.
Adecoagro (AGRO)
With uncertain weather conditions and global food shortage, agriculture stocks are likely to be in focus. Adecoagro (NYSE:AGRO) has not been in the limelight, but it’s not long before the stock gets the attention it deserves.
It’s worth noting that in the last 12 months, AGRO stock has gradually trended higher by 36%. However, valuations remain attractive with the stock trading at a forward price-earnings ratio of 7.9. AGRO stock also offers a dividend yield of 2.94% and I expect steady dividend growth in the coming years.
Adecoagro is in the business of farming, land transformation, sugar, ethanol, and energy. In the farming segment, the Company’s focus is on rice and other agricultural products. I must mention here that the valuation of the Company’s farmland was $745 million as of September 2023.
For Q4 2023, Adecoagro reported gross sales of $400 million, which was higher by 4.7% on a year-on-year basis. For the same period, the adjusted EBITDA was $95.8 million. With rising agricultural commodity prices, it’s likely that EBITDA margin will be in an uptrend. This will boost cash flows and the dividend outlook.
Borr Drilling (BORR)
Borr Drilling (NYSE:BORR) is another interesting pick in the list of undiscovered stocks. The stock has been trending lower in the last few quarters on the back of weakness in energy prices. However, at a forward price-earnings ratio of 8, BORR stock looks attractive. It’s worth noting that the stock also offers a dividend yield of 1.75%.
As an overview, Borr Drilling is a provider of offshore drilling services through its fleet of jack-up rigs. As of Q4 2023, Borr reported an order backlog of $1.75 billion. This provides clear revenue and cash flow visibility. With potential rate cuts due in 2024, I expect oil to trend higher. This will ensure that the order intake remains robust.
Last year, Borr Drilling reported adjusted EBITDA of $351 million. With a strong order backlog, the Company has guided for EBITDA of $525 million for 2024. With sharp increase in EBITDA, cash flows are also likely to swell. The growth trajectory clearly indicates that BORR stock is undervalued.
On the date of publication, Faisal Humayun 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.