- Petrobras (PBR) — Its low breakeven and consistent earnings displays could see it re-ignite its previous growth.
- Euroseas (ESEA) — Global dry bulk restructuring could see its vessels be in high demand.
- Bank of America (BAC) — A near 20% stock sell-off is unwarranted as its interest-bearing operations could catch up soon.
- ARMOUR Residential REIT (ARR) — Diversified MBS activities could sustain ARMOUR’s massive 15.08% dividend yield.
- Canadian Solar (CSIQ) — Underappreciated stock as the company shipped 3.8 gigawatts in the last quarter and anticipates robust revenue for the year.
- HP (HPQ) — We could see a rebound after its downgrade last week. HP’s prospects remain bright as its product portfolio is well diversified.
- Impala Platinum (IMPUY) — A rebound is overdue as sustained PGM prices and the firm’s access to critical deposits add significant value.
There’s no doubting the fact that we’re in a value environment. Vanguard’s exchange traded funds (ETFs) suggest that value has outperformed growth by roughly 12% in the past year. The reason for this is simply due to inflation and its correlation with safer value stocks rather than risky growth assets. I jumped on Investorplace’s stock search tool to look for a few undervalued companies and then followed that up by seeking out stocks that have recently faced unjustified downturns.
I found seven underrated value stocks to buy that I believe could rebound shortly. Whether you buy them or not is totally up to you, but I guarantee you that they’re “A-grade” assets that possess maximum risk-return utility!
|BAC||Bank of America||$37.57|
|ARR||ARMOUR Residential REIT||$7.96|
|IMPUY||Impala Platinum Holdings||$14.70|
Petrobras (NYSE:PBR) has stagnated recently after gaining more than 70% year-over-year. I see no reason why the Brazilian petroleum producer should slow down. Geographically speaking, the firm’s operating in a captive market, allowing it to operate at a breakeven price of as little as $20 per barrel of oil.
PBR’s year-end financial statements were released in February, which revealed that it smashed past its all-time profit record by delivering $21.3 billion in net income. The stock’s trading at a 5-year forward price-to-earnings (P/E) discount of 62.22%, leaving investors with substantial value to capitalize on.
This stock has seen the wrong end of things as it’s inextricably linked to port congestion and higher shipping fees. Euroseas (NASDAQ:ESEA) has lost more than 15% of its value over the past six months and is due for a rebound. Euroseas charters to many dry bulk transporters, which is beneficial at this stage considering the surge in coal and food exports amid an ex-Russia trade environment.
ESEA stock is undervalued as it’s trading at a sector price-to-earnings discount of 77.34%. Additionally, ESEA exhibits a forward operating cash flow of 2.82x, suggesting that its intrinsic value is set to remain intact.
Bank of America (BAC)
Bank of America (NYSE:BAC) has lost nearly 20% of its market value since the turn of the year. An underwhelming debt market and a slowdown in trading activities have caused serious headwinds for the stock. However, I’m encouraging my readers to be forward-looking. I see tremendous strength ahead for the debt market, and BAC could also benefit from trading activities in a rejuvenated Chinese economy, which grew by 4.8% during the first quarter.
BAC stock is tremendously undervalued. I’ve been saying for a while now that I’d rather buy bank stocks at a discount than stay in other overcooked sectors. Bank of America is trading at a price-to-sales of 3.41x and a price/earnings-to-growth (PEG) ratio of 0.12x, leaving me very optimistic about the stock’s prospects.
ARMOUR Residential REIT (ARR)
With 30-year mortgage rates now above 5%, I could easily see ARMOUR (NYSE:ARR) rebound from its year-to-date slump. The real estate investment trusts (REIT) is invested in a diverse range of fixed, hybrid, and adjustable-rate mortgage-backed securities, which is proving to be very profitable. The debt market could reach an inflection point soon where inflation could slow down, but interest rates could be elevated. Sure, this will give rise to mortality rates; however, ARR is a diversified vehicle, which is somewhat immune to slight weakness in FICO scores.
Canadian Solar (CSIQ)
Canadian Solar (NASDAQ:CSIQ) is an underappreciated company and stock; it’s as simple as that. A more than 20% year-over-year downturn has drawn the stock down to a price-to-sales discount of 2.56x and a price-to-book multiple of only 1.18x.
The company’s inference sales are in overdrive amid a global pivot towards renewable energy. CSIQ recently beat its fourth-quarter earnings target by 4 cents per share as its quarterly shipping amounted to 3.8 gigawatts. Canadian Solar’s management anticipates a strong showing for the rest of 2022, with full-year revenues expected to land between $7 to $7.5 billion.
Systemic tailwinds could assist Canadian Solar stock as the re-investment rates in renewable energy will likely be higher amid an ex-Russia energy supply world. I’m backing this asset to rebound to substantial highs this year.
Hewlett Packard (HPQ)
HP (NYSE:HPQ) capitulated by more than 5% last week after UBS (NYSE:UBS) downgraded the stock based on a weaker consumer sales outlook. I am afraid I have to disagree with the narrative as HP caters to a specific market and has a range of hardware and software offerings that smooth segmental earnings volatility. Furthermore, support could be garnered from the firm’s enterprise sales segment as necessary upgrades, and customer loyalty could play a role.
HPQ recently dominated its first-quarter earnings estimates by surpassing its earnings target by 8 cents per share. The company experienced robust demand on a company-wide basis, leading to record revenues worth $17.03 billion. The stock is undervalued at a price-to-sales ratio of only 0.67x.
Impala Platinum (IMPUY)
Impala Platinum (OTCMKTS:IMPUY) or Implats, is one of the world’s foremost producers of platinum group metals. The stock rose sharply at the turn of the year but has since slowed down on reports that it’s facing midstream congestion problems. In addition, Implats suffered an unexpected 5% half-year decline in sales volume, leading to a minor stock capitulation.
I think Impala Platinum’s fortunes will change soon. At an EV/EBITDA multiple of 3.40x, the stock is one of the most efficient PGM miners out there, with tremendous potential amid elevated precious metals prices. The company’s Impala mine in South Africa provides access to the renowned Merensky and UG2 reefs, which gives the company a tremendous competitive advantage.
Implats’s Beta coefficient of 1.60 means that it’s a volatile stock, but it could be a multi-bagger if it’s entered at the right price.
On the date of publication, Steve Booyens held long positions in CSIQ and IMPUY. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.