Large-cap stocks tend to offer less volatility. Many of these corporations are leaders in their industries with vast moats. It’s difficult for any competitor to disrupt these businesses.
These undervalued large-cap stocks share several characteristics. Each of them has rising revenue, but net income is growing at a faster pace for each of these companies. These large-cap stocks also have reasonable P/E ratios and opportunities to make their valuations more attractive for long-term investors.
Each of these stocks has also outperformed the stock market over the past five years. These are the undervalued large-cap stocks worth considering.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) trades at a 27 P/E ratio due to an exaggerated post-earnings drop. The social media giant reported strong Q1 2024 revenue growth which came in 27% higher than the same period last year. Net income more than doubled year-over-year (YOY) and exceeded $12 billion. The high net income growth prompted the tech firm to distribute dividends starting in Q4 of 2023.
Even with those good results, fears of decelerating growth prompted a correction. The temporary drop presents a buying opportunity as companies will still run ads to get in front of their ideal prospects and current customer bases.
Further, Meta Platforms has been resilient in economic challenges and has outpaced the stock market. Shares are up by 34% year-to-date (YTD) and have gained 147% over the past five years. Analysts are bullish on the stock and have rated it as a strong buy. The social media conglomerate has a projected 14% upside from current levels.
American Express (AXP)
American Express (NYSE:AXP) trades at a discount relative to other credit and debit card issuers. While it’s normal to find P/E ratios above 30 in the industry, American Express only trades at a 19 P/E ratio.
This valuation suggests that the fintech firm is slowing down, but that’s far from the case. Revenue increased by 11% YOY in Q1 of 2024. Net income growth was even better. The company reported a $2.4 billion profit which was a 34% YOY improvement. Diluted EPS grew by 39% YOY to reach $3.33 per share.
Realistically, people will continue to use their credit and debit cards during any economic cycle. These cards have enticing rewards and are more convenient than physical cash. These trends are playing out in younger generations as well. More than 60% of American Express’ new cards went to Millennials and Gen Z consumers this quarter. Shares are up by 24% YTD and have almost doubled over the past five years.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) trades at a 36 P/E ratio and has consistently outperformed the stock market. Shares are up by 12% YTD and have soared by 225% over the past five years.
The tech conglomerate offers exposure to numerous industries, such as cloud computing, artificial intelligence, gaming and business software. Microsoft increased its revenue by 17% YOY in Q3 of fiscal year 2024. Net income jumped by 20% YOY as the firm continues to strengthen its profit margins.
Unsurprisingly, Microsoft has a large runway with artificial intelligence (AI). It’s making acquisitions and recruiting top talent from AI startups to expand its lead. Also, Microsoft is gaining market share in the lucrative cloud computing industry. Its cloud segment delivered 23% YOY revenue growth and now makes up more than half of the company’s total revenue.
Analysts believe that the stock can march higher. The average price target implies an 18% gain. Thus, Microsoft stock is rated as a strong buy among 33 analysts.
On this date of publication, Marc Guberti held a long position in MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.