There’s nothing better than finding a great combination of growth and value in a stock. Unfortunately, it’s usually one or the other — a tradeoff depending on the situation. This tradeoff isn’t always the case though, and some S&P 500 stocks have a unique combination of both traits.
It allows investors to relish in the “big win” feeling of a growth stock along with that great satisfaction of getting a good deal.
There’s a lot of growth in tech but in many cases, not a lot of value. At least not by traditional measures. By the same token, a lot of non-tech stocks trade at a good value, but oftentimes lack growth and/or have volatile cash flows.
As we poke around the index, we’ve whittled down a list of seven S&P 500 stocks that offer a decent combination of growth and value. Let’s have a look.
- AbbVie (NYSE:ABBV)
- Caesars (NASDAQ:CZR)
- Apple (NASDAQ:AAPL)
- Etsy (NASDAQ:ETSY)
- Gap (NYSE:GPS)
- Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG)
- eBay (NASDAQ:EBAY)
S&P 500 Stocks to Buy: AbbVie (ABBV)
Leading off the charge is AbbVie. However, this company doesn’t just have growth and value in play, it also has yield.
Currently the stock pays out a 4.36% dividend yield. While that yield has come down over the last several quarters, that’s a good sign for those that have been long, as it means the stock has been going up.
The stock set a new 52-week high in July but has since seen a pullback. Perhaps that will act as a buying opportunity for those that want to get long. This year, analysts expect earnings of $12.64 per share. That leaves AbbVie stock trading less than 10 times earnings. By almost all accounts, a sub-10 price-to-earnings (P/E) ratio is considered dirt cheap by most investors.
On the flip side, low P/E ratios can sometimes signal a value trap. However, with estimates calling for roughly 20% earnings growth this year and 10% growth next year, AbbVie comes across as a good deal at its current price.
Caesars (CZR)
Is Caesars Entertainment the safest pick? No. Is it a bit controversial? Yes.
However, there is a rebound going on in Las Vegas and it’s hard to ignore. Admittedly, shares have undergone a tremendous rally from the March 2020 lows. So have other casino stocks. While some of its peers have fallen harder than the 25% correction Caesars has seen from its recent high, it’s due to other (and worse) situations than what Caesars finds itself in.
I like Caesars because it’s set to undergo years of rebound growth. Remember, 2021 did not start off as the boom that we’re seeing now in many parts of the economy. For the first several months, life remained quite muted.
Try finding a room in Vegas right now for the weekend. It’s not easy. While Covid-19 still presents a risk and will likely continue to present a risk going forward, it’s hard to deny the rebound we should continue to see in this part of the country.
Caesars is forecast to lose about $1.36 a share this year, but earn about $1.25 a share next year. Further, analysts expect roughly 177% revenue growth this year and 16% growth next year. If momentum continues though, next year’s estimates seem conservative.
S&P 500 Stocks to Buy: Apple (AAPL)
Everyone knows Apple. It’s the largest company in the world, with a market capitalization of roughly $2.5 trillion. Seemingly everyone has an iPhone in their pocket or some other Apple product.
For years, critics argued that the “law of large numbers” would eventually prevent Apple stock’s appreciation. Well that strategy didn’t pan out very well. Apple continues to crank out record results, even if it’s not getting the credit it deserves.
Its Services business has been a major catalyst. As it continues to churn out double-digit growth, this highly-profitable business is not only moving the needle when it comes to revenue, but it’s making major contributions to the bottom line.
Admittedly, Apple is just a hair off its all-time high, which may have some investors scratching their head when it comes to the “value” part of the equation. However, I find value in shares being up just 11% from the 2020 highs. That’s despite the last five earnings reports obliterating expectations, as revenue came in about $37 billion ahead of estimates (collectively over that span).
Maybe that market cap does eventually make it hard for the stock to advance. But as long as Apple continues to deliver, it’s hard to bet against the stock.
Etsy (ETSY)
The pick for Etsy on this list may draw some complaints from the value crowd. How can a high-flying tech company be on a list of growth and value stocks?
Etsy is going through a period of volatility at the moment. The stock saw an explosive gain during the advance of the novel coronavirus. That’s as consumers turned to online retail therapy, buying things left and right from a number of different platforms.
Despite seeing years worth of growth pulled ahead into 2020, Etsy is still finding ways to grow. Further, the company is profitable, which at least some investors are likely surprised to hear.
Estimates call for 32% revenue growth this year and another 20% next year. On the earnings front, analysts expect 11% growth in 2021 and an acceleration up to 22% growth in 2022. On an earnings valuation basis, clearly Etsy doesn’t fit the bill. But on a price-to-sales basis, Etsy trades at roughly 11 times this year’s revenue estimates. Despite a recent top- and bottom-line beat, shares remain about 20% below its 2021 highs.
S&P 500 Stocks to Buy: Gap (GPS)
Breaking away from tech, Gap comes up on our list of interesting stocks that have both growth and value as attractive qualities.
As we gear up for the back-to-school season, times are uncertain with Covid-19 still around. But Gap should be a beneficiary of increasing consumer spending.
Retail has been a pretty hit-and-miss sector over the years. Growing online sales have pressured this once cherished group, which is completely composed of the “haves” and the “have-nots.”
For Gap, shares trade at just 16 times this year’s earnings and 13 times next year’s estimates.
Many investors will likely take a pass on Gap, whether that’s due to the business specifically or the sector generally. But some may find it attractive, particularly after its recent 20% correction off a multi-year high.
Alphabet (GOOGL, GOOG)
This one was perhaps the hardest name to ultimately include on this list. I love Alphabet and I always have. After years of watching other FAANG components outperform it, Alphabet has been the best-performing FAANG stock for quite some time.
Case in point, shares are up 80% over the last 12 months. The next-best performer in that stretch? Facebook (NASDAQ:FB), which is up 36%.
With its meteoric rise, the valuation has obviously climbed as well. Yes, Alphabet has grown, but not quite as fast as its stock price. As for market cap, it now stands at $1.9 trillion, as it knocks on the door of $2 trillion.
If it gets there, it will be just the third U.S. company to do so.
As for growth, it just keeps cranking it out. Analysts expect about 37% revenue growth this year and 16% growth next year. Shares do trade at about 28 times earnings, but given its attributes, I think that’s a reasonable price. If anything, this may be one investors buy on a nice, juicy dip.
Keep in mind, that valuation isn’t just about earnings and revenue. It’s also about other assets. Alphabet has massive flexibility with its balance sheet, as it has roughly $136 billion in cash in its coffers. Its strength comes from its business assets too, like its self-driving unit Waymo or the two most popular websites in the world, Google.com and YouTube.com. That’s like owning Boardwalk and Park Place, respectively.
S&P 500 Stocks to Buy: eBay (EBAY)
Last but not least, we have an old online sales platform that many investors seem to forget about. The classic auction site known as eBay has certainly seen its fair share of ups and downs over the last couple decades.
After surviving the dot-com bust, shares exploded to an all-time high of $24.92 in December 2004, before suffering a painful drop. More than a decade later, eBay would hit a new all-time high in April 2014. Even then, it didn’t make a sustainable move above the $25 level until mid-2015.
Enough of the history lesson though, what makes eBay attractive today? Shares are quietly off the all-time high of $76.55, but trade at a relatively low valuation. Changing hands at roughly 19 times this year’s earnings expectations, many investors may view the stock as cheap. That’s with estimates calling for 13% earnings growth this year and 16% growth next year.
The downside is revenue growth, which is forecast to grow just 1.4% and 5.7% this year and next year, respectively. For a tech company, that’s not very strong. However, eBay is clearly good at making money and its bottom line is growing nicely. If investors can snag this one on a dip, it may be a nice one to hold.
On the date of publication, Bret Kenwell 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.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
