As the market continues to struggle, it’s a great time to look for undervalued stocks to buy.
There are bargains to be found in the stock market for investors who have nerves of steel and can stomach the ongoing volatility. The ups and downs of the stock market over the last year has resulted in some of the best-run companies in the U.S. having undervalued stocks. These securities are trading at a huge discount relative to their current and future earnings, creating buying opportunities for investors looking to put capital to work in a weak market.
These names should pay off handsomely over the long term. Here are seven of the most undervalued stocks to buy for 2023.
| WSM | Williams-Sonoma | $123.70 |
| WWW | Wolverine Worldwide | $13.53 |
| HOG | Harley-Davidson | $43.19 |
| HRB | H&R Block | $37.44 |
| KR | Kroger | $44.45 |
| SWK | Stanley Black & Decker | $85.83 |
Williams-Sonoma (WSM)
Kitchenware and home furnishing company Williams-Sonoma (NYSE:WSM) might not be on most investors’ radars, but it should be. The San Francisco-based concern’s stock has pulled back 13% in the last 12 months to $123 a share. The price-earnings ratio of WSM stock is currently 7.30, which is about half that of the S&P 500. And the shares pay a quarterly dividend of 78 cents a share, resulting in a yield of 2.50%.
Other reasons to consider adding Williams-Sonoma to your portfolio include the fact that the company has no debt, a strong online and social media presence ( it has 1.6 million followers on Instagram), and a net income margin of 13.5%. Also noteworthy is that WSM has increased its earnings per share (EPS) at an average clip of 50% over the last three years. Finally, Williams-Sonoma’s 22% revenue growth in 2021 was more than triple the 7% average growth rate of the U.S. furniture industry.
Add in $2.5 billion of stock buybacks in the past five years, and WSM stock looks like a no-brainer. Investors should buy the dip of this undervalued stock.
Wolverine World Wide (WWW)
Investors might not be familiar with Wolverine World Wide (NYSE:WWW), but they certainly know its products. The Michigan-based footwear company makes some of the most popular sneakers and shoes in the world. Its portfolio of brands includes Hush Puppies, Merrell, Keds, Saucony and Top Sider, to name only a few. Wolverine also has agreements in place to make footwear for other companies such as Caterpillar (NYSE:CAT).
Wolverine thrived before the Covid-19 pandemic. In February 2020, WWW stock was trading above $30 a share. However, retail store closures during the pandemic hurt its business, and it has struggled to overcome excess inventories as the economy has reopened, leading it to implement discounts and markdowns.
Consequently, Wolverine’s stock has declined 47% over the last year, and the stock’s low price-earnings ratio of 6.86 indicates that it is undervalued at its current levels.
Despite its woes, WWW stock pays a quarterly dividend of 10 cents per share, which equates to a significant yield of 3%. Look for this stock to rebound once WWW’s inventories are adjusted and inflation continues to ease.
Harley-Davidson (HOG)
Motorcycle manufacturer Harley-Davidson (NYSE:HOG) is a legendary company not just in the U.S. but all over the world. A going concern since 1903, Harley-Davidson continues to make some of the most popular, in-demand motorcycles. And while its stock has been on an upswing over the past six months, its long-term performance has lagged the market. In the past 12 months, HOG stock has gained 29%, which is great. But over the last five years, the stock is down 22%.
Harley-Davidson’s current P/E ratio of nine is also low and shows the stock is a bargain at its current levels. HOG also pays a quarterly dividend of 16 cents a share, giving the stock a yield of 1.45%
The reasons for the shares’ long-term underperformance are many. The company’s efforts to expand its brand into other areas of the motorcycle ecosystem such as apparel, accessories, and lifestyle products have had mixed results. And some investors have been concerned about the costs and uncertainty associated with Harley Davidson’s plans to pivot to electric motorcycles.
Still, the strong brand awareness and popularity of its motorcycles make HOG stock an undervalued stocks to buy for 2023.
H&R Block (HRB)
Tax season is fast approaching, making it a good time to consider H&R Block (NYSE:HRB). The Kansas City-based tax preparation company had a spectacular 2022, with its share price gaining 75% in a down market.
But even with that monster growth, HRB stock still looks undervalued . The stock’s P/E ratio is only 11.83 despite the big advance, and the median price target on the stock is $48.
Moving forward, HRB stock is likely to continue benefitting from the company’s strong earnings growth. Analysts, on average, expect the firm’s EPS to increase at a mean rate of 12.5%. Analysts’ mean estimates calls for its earnings in 2023 and 2024 to grow 8.3% and 9.8%, respectively. And H&R Block continues to execute on its five-year strategic plan, called “Block Horizons,” that focuses on building stronger relationships with small businesses and expanding its suite of digital tax tools.
HRB stock also has a dividend yield of 3.1%. And, given the nature of its business, investors can have confidence in H&R Block’s record keeping.
Kroger (KR)
As the largest supermarket operator and fifth largest retailer in the U.S., Cincinnati-based Kroger (NYSE:KR) should get more attention from the investing community, especially given its relatively cheap valuation. At Friday’s closing share price of $44.39, KR stock is trading 35% below its 52-week high of $62.78. The P/E ratio of 13.9 is slightly below the S&P 500 mean of 16 and far below the ratio of competitors such as Costco (NASDAQ:COST) and Walmart (NYSE:WMT).
Kroger’s diminished valuation is due almost entirely to uncertainty surrounding its proposed $24.6 billion merger with its rival supermarket chain ,Albertsons (NYSE:ACI), a deal that will solidify Kroger as the biggest supermarket chain in America by revenue.
However, while the merger still needs regulatory approval, it remains on track to close in 2024. But even without the deal, Kroger remains a solid long-term stock to own. It also has a dividend yield of 2.34%.
Stanley Black & Decker (SWK)
Tool and hardware giant Stanley Black & Decker (NYSE:SWK) has seen better days. The Connecticut-based company’s share price has slumped 51% in the last 12 months, pulling its P/E ratio down to 9.4. Over the past five years, SWK stock has decreased 50%.
The prolonged slump is the result of cost pressures due to international trade tariffs, unfavorable foreign exchange rates, and increased commodity prices, all of which were an issue for the company before the pandemic. Bloated inventories have also been a problem.
However, Stanley Black & Decker is making moves that will turn its business around. These include cutting costs by $2 billion over the next three years, with $1 billion of the cost reductions slated to take place in 2023. Stanley Black & Decker also plans to reduce the number of products it sells, utilize fewer suppliers, and revamp its supply chain. Last year, the company sold its electronic security and automatic doors businesses to help refocus on its hammers and drills.
If the turnaround succeeds, investors can expect the stock to rally. Worth noting is that SWK stock has a dividend yield 0f 3.75% at present.
Goodyear Rubber & Tire (GT)
Few stocks look as undervalued as Goodyear Rubber & Tire (NASDAQ:GT). GT stock has fallen nearly 50% in the last year, and its P/E ratio currently sits at 3.8. Over the past five years, the company’s share price has plunged nearly 70%. This is a truly dreadful performance for a company that is a household name in the U.S.
The Ohio-based company that has been in business since 1898 had struggled with rising competition and slowing sales for years before the Covid-19 pandemic. But in 2022, higher raw materials prices and the negative impacts of a strong U.S. dollar caused the share price to crater.
Management is trying to evolve. At this year’s Consumer Electronics Show (CES), Goodyear unveiled a new tire that contains 90% sustainable materials.
The company has let it be known that, after more than a century, it is trying to lessen its reliance on rubber. Time will tell if the shift works. But some analysts are starting to warm to GT stock. Keybanc Capital Markets, for example, recently placed an “overweight” rating and a $39 price target on the stock.
On the date of publication, Joel Baglole held a long position in KR. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
