Markets have made considerable gains so far this year. But it’s not too late to find high-quality S&P 500 stocks selling at compelling prices in August 2023.

How should an investor choose among various undervalued S&P 500 stocks? All seven of these picks have a strong upside today.

Adding to that, they are all 5-star stocks, according to Morningstar’s analysts as well. That makes these seven undervalued S&P 500 stocks great selections going forward.

Verizon Communications (VZ)

Verizon Communications (NYSE:VZ) is one of three primary mobile phone carriers in the United States.

Investors have long gravitated to this industry for its defensive nature and high dividend yields. That paradigm has come under fire lately, however. After a debt-fueled spending spree, AT&T (NYSE:T) was forced to slash its dividend and divest assets recently.

Traders have assumed that a similar fate will befall Verizon. Even though Verizon’s profits have been stable and it has maintained its dividend, shares have fallen by about 40% from their prior highs. That’s a massive move for a generally low-volatility blue chip stock such as this one.

It’s true that higher interest rates hurt heavily indebted companies such like telecoms. And Verizon is spending heavily on 5G rollouts and other network improvements. But there’s light at the end of the tunnel as spending will finally decline in 2024.

All told, VZ stock seems way too beaten up at current depressed levels. Shares go for just 7x forward earnings and offer a 7.8% dividend yield.

PayPal Holdings (PYPL)

PayPal Holdings (NASDAQ:PYPL) is an online payment platform. Known for its namesake payment processing service, it has also expanded into ancillary and related services like money transfers.

PYPL stock soared to unprecedented heights early on in the pandemic. With global e-commerce booming and brick-and-mortar retailers rushing to install contactless payments solutions, PayPal seemed to be winning on all sides. But as the economy reopened, those tailwinds disappeared and growth rates plunged. And with it, so went PYPL stock.

What a fall it’s been. The stock is down from a peak of more than $300/share to just $63 today. With that sort of decline, you’d be forgiven for thinking that the business had entirely collapsed. And yet, the truth isn’t nearly so dour.

Analysts see PayPal growing revenues by 8% this year and earnings per share rising fully by 19% for 2023. Further, double-digit gains are anticipated for 2024. PayPal stock didn’t make much sense at $300 — that was an inexplicable valuation. But, a few years from now, the current depressed valuation may seem equally misguided. At just 12 times forward earnings, and with those earnings continuing to grow rapidly, PYPL stock is a bargain here.

Global Payments (GPN)

Paypal isn’t the only payment company unfairly blasted over the past 18 months. Global Payments (NYSE:GPN) shares fell as much as 43% from their 2021 peak to the recent lows.

That comes even as Global Payments has continued to grow revenues at 7% annually and earnings at a low double-digit annualized rate. With the share price decline, Global Payments is now going for 12 times forward earnings.

This is a huge opportunity. Global Payments is a broadly diversified business offering merchant solutions, issuer services and consumer solutions. That is to say, Global Payments can handle card acceptance, security, accounting and reporting functions, chargeback resolution and a variety of other functions.

The company is deeply integrated into merchants’ information technology systems with heavy investments in omnichannel support, making it a leader as retailers pursue sales across various brick-and-mortar and online platforms. GPN stock rallied recently after a far better-than-expected Q2 earnings report. Even so, shares still go for less than $130, whereas Morningstar’s Brett Horn sees fair value at $179 per share.

Estee Lauder (EL)

Estee Lauder (NYSE:EL) is one of the world’s leading cosmetics companies. Over the years, it has grown tremendously, positioning itself as an accessible luxury.

Estee Lauder fared unexpectedly well over the past few years. Despite the pandemic and the temporary closure of shopping centers, Estee Lauder sales held up. The firm’s strong investments in direct-to-consumer and alternative sales channels made it well-positioned to withstand the shake-up. And, as the economy reopened, demand surged as folks wanted to look good coming out of lockdown.

That momentum has abruptly reversed in 2023. Weakness with the Chinese consumer market, in particular, has caused Estee Lauder to repeatedly miss estimates. However, with EL stock down 40% over the past 12 months, economic concerns are more than baked into the cake at this point.

Realty Income (O)

Realty Income (NYSE:O) is a leading triple-net REIT. Triple nets are a type of real estate trust where the tenant — rather than the landlord — pays key expenses such as taxes, insurance, and maintenance. These fare well in inflationary environments as the landlord isn’t on the hook for sharp increases in those costs.

Regardless of this advantage, O stock has sold off along with the rest of the REIT industry. Higher interest rates hurt real estate owners since they have to pay out more interest on the debts used to fund property purchases. In addition, investors tend to demand higher dividend yields off their REITs to compensate for elevated interest rates. In a world where a bank Certificate of Deposit pays 5%, investors can be more choosy about their dividend stocks.

That said, with O stock down 22% over the past year, the selling has gone too far. Shares now yield 5.2%. And Morningstar’s Kevin Brown sees fair value up at $76, a considerable increase from today’s $58 price.

Albemarle (ALB)

Albemarle (NYSE:ALB) is a leading specialty chemical company. It produces bromine, lithium and other such goods.

Despite being in a volatile industry, Albemarle has built an admirable track record. Indeed, it is a Dividend Aristocrat, having raised its dividend for more than 25 consecutive years.

Shares have sold off sharply in 2023 amid a downturn in demand from China. However, in the bigger picture, electric vehicles continue to take market share, and the batteries needed to power them will consume tons of lithium. In other words, Albemarle is a long-term growth stock currently on sale at a sharp discount.

China just surprised the market with an unexpected rate cut. That could be the catalyst to get the Chinese industrial sector going again and lift shares of beaten-down commodity producers such as Albemarle.

Tyson Foods (TSN)

Tyson Foods (NYSE:TSN) is a packaged foods company focused on meat and meat products.

The company’s fortunes have taken a downturn recently due to soaring inflation. As the price of agricultural goods rose with Russia’s invasion of Ukraine, livestock costs also jumped, lowering profit margins. As Tyson is largely a commodity producer selling meat at market prices, it doesn’t have much operational flexibility.

Thankfully for Tyson, things are now turning in its favor. Grain prices have plummeted as world agricultural conditions have started to normalize. Corn, for example, has fallen more than 40% since its 2022 peak. That should lead to better livestock availability and better results for Tyson.

TSN stock, for its own part, is off by a third over the past year. Earnings will be depressed in 2023, and it’s understandable why short-term traders are selling. Longer-term investors, however, are getting a good deal, and there’s a 3.5% dividend yield for shareholders while they wait.

On the date of publication, Ian Bezek held a long position in VZ, EL, GPN, and ALB stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.