6 Growth Stocks That Are Bargains After Taking a Tumble


  • These bargain growth stocks have low valuations and higher than average dividend yields.
  • JPMorgan Chase (JPM): Analysts expect the bank to report solid earnings next year.
  • MDC Holdings (MDC): This home building stock has dropped over 32% YTD and the stock is now cheap at 3.8x earnings.
  • Goldman Sachs (GS): This major investment banking firm is now moving more into consumer banking rather than just Wall Street banking.
  • KB Home (KBH): The stock is down almost 25%, giving it a very cheap P/E of just 3.2x earnings and a 1.85% dividend yield.
  • Ford (F): Ford stock is down over 40% year-to-date, but the company is still primed for growth in the years ahead.
  • Verizon (VZ): Verizon is cheap and also has more room to grow.
Bargain growth stocks - 6 Growth Stocks That Are Bargains After Taking a Tumble

Source: Katakari / Shutterstock

The following are bargain growth stocks as their valuations are low, they feature cheap price-to-earnings multiples and also have higher than average dividend yields. In addition, their earnings are still expected to rise, despite fears of a recession.

Moreover, these stocks may be reaching close to their trough levels for the cycle. The market discounts the future at least six months in advance.

As a result, the average P/E of this list of bargain growth stocks is 6.9x and the average dividend yield is 3.63%. Moreover, these are still growth companies.

7-22-22 - Bargain Growth Stocks - Mark R. Hake, CFA

Source: Mark R. Hake, CFA

Analysts may be forced to lower their outlook for a number of these stocks. That is what the market fears and why the stock prices are so cheap now.

But these stocks are set to deliver positive earnings next year along with good dividends that make them bargain growth stocks.

Let’s dive in and look at these stocks.

Ticker Company Recent Price
JPM JPMorgan Chase $116.27
MDC MDC Holdings $36.63
GS Goldman Sachs $325.43
KBH KB Home $31.77
F Ford $12.90
VZ Verizon $44.64

JPMorgan Chase (JPM)

JPMorgan Chase (NYSE:JPM) recently released its earnings and they came in at $2.76 per share, a miss of 15 cents from analysts’ expectations of $2.91 in earnings-per-share.

Nevertheless, analysts still forecast EPS of $11.19 this year and $12.57 next year. That puts JPM stock on a forward price-to-earnings of 10.3x for 2022 and 9.1x for 2023. This represents potential earnings growth in 2023 of over 12% for 2023.

JPMorgan bank is a good dividend-paying stock. Right now it is paying a $4 dividend, but it is likely to raise that dividend soon. When the bank declares its dividend by late September it may raise the dividend. As it stands now, at $114.76 as of July 22, JPM stock has a dividend yield of 3.49%.

This is significantly higher than its historical dividend yield. For example, Seeking Alpha shows that its average yield over the last four years has been 2.76%. This means that if the stock price had that yield now it would be at $144.93. That implies a price target 26% higher than today.

MDC Holdings (MDC)

MDC Holdings (NYSE:MDC) is a major home-building company whose stock is down over 32% YTD. Nevertheless, analysts still see the company making positive profits both this year and next.

Estimates are for $10.41 per share this year and $10 next year. That puts the stock on a forward P/E multiple of 3.8x times this year and 3.9x next year.

Moreover, the company is still paying its dividend of $2 per share, well-covered by its earnings. This gives MFC a 5.10% dividend yield.

That yield is significantly higher than the home builder’s historical average over the past four years. The average has been 1.85%. So, if we divide its $2 dividend by 1.85%, the average price target is $56.18. That is more than 40% over today’s price and shows that the stock is a good bargain now.

Goldman Sachs (GS)

Goldman Sachs (NYSE:GS) is a major investment banking firm that is now moving more into personal banking and consumer lending. The stock has been hit this year and is down over 18% YTD. As a result, the stock is now very inexpensive.

For example, the stock is now trading on a forward P/E of just 9.3x for 2022 and 8.5x for 2023. This implies that the company is forecast to show 9.5% earnings growth next year.

Moreover, the bank now pays a dividend of $8 annually. It is likely to hike that dividend in the fall. So the stock now has a dividend yield of 2.47%. That is significantly higher than its average yield of 1.85% over the past four years.

As a result, the stock now has a target price of $434.43, based on its average dividend yield. For example, if you divide the $8 dividend by 1.85%, its historical yield, (i.e., $8/0.0185) the price works out to $434.43.

That means that GS stock is worth at least 34% more than today’s price. That makes it one of the top bargain growth stocks on this list.

KB Home (KBH)

KB Home (NYSE:KBH) is a national home builder whose stock is now down 26% YTD. This makes the stock very inexpensive right now.

For example, analysts forecast that earnings this year, although down from last year, will still reach $10.18 per share. This puts it on a forward P/E multiple of just over 3.2x earnings.

Moreover, the home builder still can afford a dividend of 60 cents, as it represents just 5.89% of its forecast earnings for 2022. In addition, at $32.42 per share, the stock now has a healthy dividend yield of 1.85%. Clearly, the company could afford to pay a higher payout ratio, which would also raise its dividend yield.

The market fears about a recession have forced this stock down to unprecedented valuation levels. For example, the average price target of 13 analysts surveyed by TipRanks is $38.67, or 22% over today’s price.

This shows that it is one of the best bargain growth stocks.

Ford (F)

Ford (NYSE:F) is in the process of transforming into an all-electric car manufacturer. It is planning on splitting off its electric car holdings into a separate company. They are likely going to copy Tesla (NASDAQ:TSLA) and some of its practices.

However, despite the fact that the stock is down 41% YTD, its average P/E for this year, based on estimates from analysts surveyed by Seeking Alpha, is just 6.7x.

Moreover, for next year, the stock trades for just 6.3x earnings. That implies that analysts forecast earnings growth of 5.7% next year.

In addition, Ford is now paying a dividend of 10 cents per quarter or 40 cents annually. That gives it, at $12.82 per share, a dividend yield of 3.12%. Moreover, the company can clearly afford the dividend. The 40 cents dividend is just 25% of the $1.59 EPS forecast for this year, and just 20.8% of the $1.92 EPS for next year.

Verizon (VZ)

Verizon (NYSE:VZ) is in the process of ramping up its 5G investments, but the company is still growing its earnings and cash flow. Right now analysts forecast Verizon earnings to rise 1.8% to $5.51 per share next year, up from $5.41 this year.

This puts VZ stock on a forward P/E multiple of just 8.2x this year, and 8.1x next year. Moreover, the $2.56 annual dividend is still less than half of the company’s earnings (47%). It also brings investors in VZ stock an annual dividend yield of 5.76%.

This yield is much higher than its average over the past four years, or 4.42%. In fact, if the price had the same yield now, it would be much higher. For example, if we divide $2.56 by 4.42%, the price target works out to $57.92. That is over 30% over today’s price. This makes it one of the best bargain growth stocks.

On the date of publication, Mark Hake 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.

Article printed from InvestorPlace Media, https://investorplace.com/2022/07/6-growth-stocks-that-are-bargains-after-taking-a-tumble/.

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