With the S&P 500 near all-time highs since bottoming last year, many probably feel it’s impossible to find viable cheap stocks today. After all, this situation has also been complicated by the popularity of “meme stock” investing. However, with the transition from a pandemic-ridden economy to a recovering one, some opportunities now exist.
Of course, it’s also important to know exactly why low-priced stocks are trading so cheaply. Though there are genuine factors that could impact price, the reasons could be flimsy as well. For instance, the way the market focuses on the short term is one reason; certain discounts occur due to pure misunderstandings.
Still, many cheap stocks will benefit from a “return to normalcy.” In the United States, continued progress in response to the pandemic, including the recent stimulus, has proven critical in sustaining this recovery.
Moving forward, we are likely to see many changes across various sectors as part of that post-pandemic transition. This shuffling will create buying opportunities for cheap stocks that could grow at a healthy pace in 2021 and beyond. As such, the following list covers just some of these potentially lucrative opportunities:
- Clean Energy Fuels (NASDAQ:CLNE)
- Lloyds Banking Group (NYSE:LYG)
- Aegon (NYSE:AEG)
- Angi (NASDAQ:ANGI)
- Zynga (NASDAQ:ZNGA)
- Telefónica (NYSE:TEF)
- Waitr (NASDAQ:WTRH)
Cheap Stocks to Buy: Clean Energy Fuels (CLNE)
Having become recently popular on Reddit, Clean Energy Fuels is a distributor of natural gas as an alternative fuel, dealing primarily in compressed natural gas (CNG) and liquefied natural gas (LNG). This company distributes its gas through a well-spread network of some 540 fueling stations across North America. Moreover, despite its struggles in 2020, CLNE stock could gain handsomely this year on the back of multiple growth drivers.
Of course, although Clean Energy Fuels has an excellent business model, it has also struggled with its sales volume and margins. However, its recent deal with Amazon (NASDAQ:AMZN) could guarantee more consistent sales volume growth. It could also be an opportunity for the company to show its capabilities to other fleet customers.
Finally, the clean-energy push from President Joe Biden and his administration will also benefit CLNE greatly in the future. The company has done well to shore up its finances; its cash in hand has risen 53% from 2018 to today. Plus, over the past few years, Clean Energy has also eliminated much of its debt and expanded its asset base globally.
Lloyds Banking Group (LYG)
Next up on this list of cheap stocks is Lloyds Banking Group, a British retail and commercial bank which is currently its home country’s largest mortgage lender. In fact, LYG has been one of the more resilient banks in the U.K., turning a profit in the most testing of times. So, with the outlook brightening for LYG stock, expect this name to take off in a big way this year.
For the first quarter, Lloyds’ results posted an underlying profit of £2.07 billion ($2.86 billion) compared to the £558 million ($771.9 million) it made in the same period last year. Moreover, its statutory pretax profit rose to £1.90 billion ($2.62 billion) versus £74 million ($102.3 million) in 2020. On top of this, its forward five year compound annual growth rate (CAGR) net income estimate is at an incredible 37.61%. Lastly, the company plans to resume its progressive ordinary dividend policy, which was suspended last year.
Despite all these positives, though, LYG stock trades at just 2.12 times forward sales.
Cheap Stocks to Buy: Aegon (AEG)
Aegon is the next name on this cheap stocks list. This company is a Dutch insurance firm that operates in several geographies, including the United States, the United Kingdom and other countries.
True, Aegon has had several fundamental issues in the past, but most of them have since been addressed. Now it’s a financially robust company with strong revenue growth and an attractive dividend yield of 2.02%. Moreover, AEG stock trades at 0.37 times forward sales.
Impressively enough, Aegon recently reported its Q1 results and saw a net result of 386 million euros ($459.7 million) which improved 43% on a quarter-over-quarter basis. On top of that, the company’s operating result increased by 20% to 431 million euros ($513.3 million), leading to its highly effective expense savings program. Finally, Aegon “reduced its addressable expense base” by a whopping 136 million euros ($161.9 million). Therefore, AEG stock is one of the most undervalued and attractive insurance pure plays on the market today.
Formerly known as Angie’s List, Angi is a company that connects home service professionals to consumers in the United States and Canada. For this past year, over 32 million projects were completed on its platform in various categories, including roofing, plumbing, remodels, cleaning and more.
Now, though, Angi plans to shift from its lead-generating service research business to a gig-economy brand in order to create a genuine online marketplace. Growth has slowed in the past few quarters, but the company’s revenue growth still improved by double-digit percentages in the past couple of quarters. Currently, ANGI stock is also estimated to see forward revenue growth upwards of 15% — significantly higher than its peers.
Today, the U.S. home improvement market is estimated to be worth about $500 billion. So, for this pick of the cheap stocks, an increased online adoption among home-service professionals and customers — as well as Angi’s strong management team — will likely create a lot of upside.
Cheap Stocks to Buy: Zynga (ZNGA)
Next up on this list of cheap stocks is Zynga, a mobile-game developer operating in the United States as well as internationally. This company produces, markets and operates social games played on mobile as well as various social-media platforms.
As far as revenues go, Zynga’s sales saw staggering year-over-year (YOY) growth of over 54%. The company also saw its monthly active users (MAUs) grow to 164 million in Q1 2021. Now forward revenue growth estimates stand at an impressive 33.58% for ZNGA stock. However, despite the company’s stellar track record, it’s currently valued at just 4.29 times forward sales.
For Q1, revenues hit a record $680 million while mobile daily active users jumped 85% to 38 million. Zynga’s management also raised full-year guidance to $2.7 billion. Now, the company’s forward free cash flow growth per share is at a spectacular 39%. Lastly, it has also made some interesting acquisitions which should further expand its future growth runway.
Telefónica is the next name on this cheap stocks list and one of the top telecom operators working in both Europe and Latin America. Despite the challenging economic environment, the company has been resilient in growing its profits.
On top of this, TEF has also been restructuring its business in the past year to streamline operations and focus on its most profitable markets. Moreover, two of its deals — the divestiture of its Telxius tower division and its U.K. mobile network merger with Virgin Media — will close out this year. Both agreements will reduce the company’s financial leverage and unlock a lot of value for TEF stock.
All in all, the larger operating environment is improving for Telefónica. Now, the company’s drop in revenues has narrowed in 2021. Moreover, there are several positive drivers which should kickstart its recovery. Some of these include increasing roaming revenues, improved trading momentum, higher demand for digital services and the potential end to its supply-chain disruptions. Additionally, the company boasts a remarkable dividend profile, with a 14.87% yield and a payout ratio of over 200%.
Cheap Stocks to Buy: Waitr (WTRH)
Last up on this list of cheap stocks is Waitr, an online ordering technology platform that connects drivers, restaurants and diners. This company has listings on its platform in some 700 cities across the United States. What’s more, CEO Carl Grimstad recently engineered a mighty turnaround for the company, saving it from the brink of bankruptcy. Waitr has since posted healthy revenue gains in the past few quarters and continues to expand its partnerships.
Under new management, Waitr has effectively streamlined its expenses and become profitable. In Q1 of this year, it generated revenue of $50.9 million, with a 15.1% increase on a YOY basis. Additionally, the company’s adjusted EBITDA was at $8.3 million compared to $3.7 million in the previous year.
Despite its turnaround, though, WTRH stock trades at just 1.09 times forward price to sales (P/S), furthering cementing its place on this bargain list.
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On the date of publication, Muslim Farooque did not have (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.
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.