If you are a value investor looking for undervalued stocks to buy, there are plenty of opportunities. The AI craze has captured all attention, with a handful of beneficiary stocks garnering the most interest. This has created pockets of value elsewhere.
Indeed, opportunities for value investors are increasing due to some structural factors. As famed investor David Einhorn outlined in a recent CNBC interview, due to passive indexing, there are fewer value stock pickers left. This dynamic favors those willing to buck the trend and look for undervalued gems out of the limelight.
Today, there are interesting companies with healthy growth trading at attractive multiples. Instead of paying outrageous price-to-sales multiples for future earnings, buy these undervalued stocks to buy.
These three stocks pay you immediately with earnings since they are highly profitable. Furthermore, they are trading below the market’s price-to-earnings and are returning cash to shareholders.
Shift4 Payments (FOUR)
While investors often consider undervalued stocks low-growth stocks, Shift4 Payments (NYSE:FOUR) is different. It’s a high-growth company increasing sales at multiples of the market yet trading at an 18xs forward P/E.
It’s worth noting that the stock is coming off some disappointing news. In November 2023, the CEO Jared Isaacman announced a strategic review. Investors were hoping the company would find a buyer. Unfortunately, in a memo to employees last month, the CEO stated they rejected several buyout offers since they didn’t adequately value Shift4 Payments.
This news quickly deflated FOUR stock, which tumbled from $85 to below $70. Fortunately, for patient investors, this is the right time to scoop these shares. This is a profitable growth company with amazing fundamentals.
Revenue growth has been stellar, hitting 46% and 29% in fiscal years 2022 and 2023, respectively. In 2023, it added thousands of SkyTab customers and installed over 25,000 systems. Moreover, it landed new hotels and added big entertainment and sports customers like the LA Dodgers, LA Rams and NY Yankees.
Looking ahead, management guidance predicts at least 38% year-over-year growth. Additionally, they expect EBITDA of at least $635 million, representing 38% YOY growth. Therefore, you can buy FOUR stock at a forward EV/EBITDA of 9 today.
Expedia (EXPE)
At the current price, Expedia (NASDAQ:EXPE) trades at 11x forward earnings. That’s almost a 50% discount to the S&P 500’s multiple, making it one of the most undervalued stocks to buy.
This stock is coming off impressive 2023 results, achieving the highest-ever full-year revenue. Gross booking grew 10%, driving revenues from $11.6 billion in 2022 to $12.8 billion. As a result, adjusted EPS grew 43% to $9.69. What’s more, it repurchased 19 million shares for $2 billion.
Operationally, the company also made several improvements supporting higher profitability going forward. It consolidated all its brands on one front-end technology stack. This will offer a unified test-to-learn platform and drive faster deployment and improved performance in new products.
Through its transformation, the company has exited poorly performing business units. At the same time, it closed over 100 office locations. All these measures improved profitability, with EBITDA margins expanding by 75 basis points in 2023.
Since travel is still booming, Expedia is among the most undervalued stocks to buy today. Analysts have an average price target of $161, which represents a substantial upside from current levels.
Delta Airlines (DAL)
Airlines continue to benefit from robust travel, especially international travel. Among the big three U.S. airlines, Delta Airlines (NYSE:DAL) is the premium carrier. The company is undoubtedly heads and shoulders above its peers in terms of customer experience and operational performance.
Despite these competitive advantages, DAL stock is one of the most undervalued stocks to buy. As of this writing, the company trades at 7x forward earnings. This valuation underappreciates the impressive operational performance of the airline.
Indeed, after growing operating revenue by 20% in 2023, management has raised their outlook for 2024. At the JPM Conference, CEO Ed Bastian stated that Delta was seeing robust demand from the return of corporate travel. Furthermore, management cited the healthy domestic market and strength in premium products as a boost to growth in the quarters ahead.
Given these strong tailwinds, Delta will easily surpass the $6 to $7 EPS guidance it issued for FY2024. Thus, DAL stock is trading below 7 times forward earnings as of this writing. In addition to the dirt-cheap valuation, Delta Airlines reinstated its dividend in June 2023.
Lastly, analysts are bullish on DAL stock prospects. Jeffries has a price target of $58 and a “buy” rating. The firm believes it is a top-tier operator that will profit from its premium offerings and other revenue streams, especially its aircraft maintenance and repair business.
On the date of publication, Charles Munyi 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.