It’s tough to find stocks trading at reasonable prices, especially in a market where high valuations are becoming the norm. However, the great thing about investing with a long-term horizon is you need not have a truckload of money to build a solid portfolio. A small amount of money invested in the right cheap stocks can consistently reap great rewards for investors.
Stimulus checks and stay-at-home orders inspired many workers to invest in the equity market. As a result, finding cheap stocks in today’s market is doubly difficult. However, even with immense and widespread enthusiasm for investing, there are several undervalued stocks ready to break out. Moreover, investor interest in a few high-profile stocks leaves the door open for other, cheaper offerings.
The following are seven of the most promising cheap stocks to buy that have plenty of upside potential:
- Paysafe Limited (NYSE:PSFE)
- Cronos Group (NASDAQ:CRON)
- Lloyds Banking Group (NYSE:LYG)
- Zynga (NASDAQ:ZNGA)
- Telefonica (NYSE:TEF)
- Aegon (NYSE:AEG)
- Hecla Mining (NYSE:HL)
Cheaps Stocks: Paysafe Limited (PSFE)
Paysafe is a specialized payments platform that has established itself as a juggernaut in the digital commerce industry. It operates in multiple verticals, including online banking, digital wallets, iGaming and eCash.
All of these segments are set to grow at an impressive rate over the next few years. Hence, Paysafe could generate massive free cash flows in the coming years and push PSFE stock to new heights.
In addition to organic growth, the company is looking to expand its footprint through mergers and acquisitions. Its management has closed out several deals in the past year and will continue adding more complementary businesses.
Moreover, Paysafe has solid financials with a healthy cash balance of $247 million. Looking ahead, its cash till is likely to increase substantially with stronger cash flows, which will further limit Paysafe’s debt burden.
Cronos Group (CRON)
Cronos Group is a Canadian cannabis producer which aims to monetize its asset beyond its home region. It is building a global network through partnerships which could potentially contribute to its revenues in a major way.
Moreover, Cronos’ research and development efforts — particularly its fermentation program — could produce a superior product and command higher margins.
CRON stock has been on a downward spiral ever since Altria’s (NYSE:MO) $1.8 billion investment in the company. Shares have dropped more than 37% in the last six months.
However, Cronos has multiple initiatives lined up for the next few years that can positively impact its stock price. Its PharmaCann investment is the first step towards Cronos’ foray into the U.S. market.
Cronos has nearly $900 million in cash and equivalents, which it is likely to use to make more investments in U.S. multi-state operators.
Cheap Stocks: Lloyds Banking Group (LYG)
Lloyds Banking Group has proven to be extraordinarily resilient amidst the challenges presented by the global pandemic. With the group’s robust balance sheet and operational efficiency, it is in an excellent position to take advantage of the improving credit outlook.
Moreover, LYG stock trades at just 2.1 times forward sales, which is more than 30% lower than its sector average.
The British high street bank’s half-year profit and net income surpassed analysts’ expectations, driven by a buoyant mortgage market and improving credit outlook. Additionally, the bank has benefited from the U.K. government’s Coronavirus Job Retention Scheme.
Lloyd Banking Group’s net interest margins are expected to be above a vigorous 2.5% for the year. Furthermore, its dividend profile has improved vastly.
Zynga is a mobile video game developer that supports games for players in more than 175 countries and regions. Its games are free, but further transactions in its apps are carried out using virtual currency that can be earned by completing missions, watching advertisements or purchasing it through actual cash.
With analysts predicting annual growth of 11.5% in the mobile gaming sector through 2027, ZNGA stock is poised for a breakout in the coming months.
Zynga is actively acquiring new companies to diversify its portfolio of games and expand its market share. For instance, it recently purchased Chartboost, an advertising platform with more than 700 million monthly users. Additionally, Zynga just closed its acquisition of Chinese game developer StarLark.
The synergy between its acquisitions is likely to boost Zynga’s top line and improve its EBITDA significantly.
Cheap Stocks: Telefonica (TEF)
Madrid-based Telefonica provides telecommunication services in the European and Latin American regions.
After a rough couple of decades, it appears the company is finally moving in the right direction with its major reorganization effort. The goal is to unlock value, boost free cash flows and reduce financial leverage as much as possible.
The company has sold its tower business to American Tower (NYSE:AMT) for 7.7 billion euros. Moreover, it plans to merge its U.K. mobile network business with Virgin Media (NASDAQ:VMED).
Both deals will allow Telefonica to vastly improve its financial flexibility and support additional investments into 5G. Moreover, with pricing pressures beginning to ease, the company will be able to command higher margins again.
TEF stock trades below its one-time forward sales with a phenomenal upside ahead, making it a fabulous investment option.
Dutch financial services company Aegon has made significant strides in its turnaround program, posting strong operating results. However, AEG stock still trades at a depressed valuation, which makes it a fascinating value play.
Fundamentals have been stellar in the past year, with year-over-year revenue growth over 50%. This year’s second-quarter operating results improved by 62%, driven by effective expense management and higher fees from more conducive equity markets.
Aegon posted an astounding net profit of 849 million euros compared to a net loss of 1.07 billion euros in the prior-year period. On top of that, Aegon’s dividend profile is looking impressive as well, with a yield of more than 3%.
Cheap Stocks: Hecla Mining (HL)
Hecla Mining is a producer of precious and base metal properties both in the U.S. and across the globe. The company has a leading market share in certain precious metals, such as silver.
Its financial performance has been incredible of late, with double-digit revenue growth in its last couple of quarters. HL stock is significantly undervalued based on its long-term growth runway.
Revenues in the second quarter rose to $218 million, representing a 62% increase from the previous year. The strong performance was mainly due to the higher metals prices.
Moreover, Hecla Mining’s financial strength has improved drastically. It currently has $400 million in liquidity and sees considerable free cash flows. Given its incredible performance in the past couple of quarters, the company is in a great position to end the year on a high.
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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.