Many well-known, undervalued growth stocks can be bought now at cheaper prices. The key is for investors to know where to look to snap up these very growth stocks that can give their portfolio a shot in the arm. And provide them with consistent, long-term gains. In fact, here are seven to strongly consider.
Undervalued Growth Stocks: Applied Materials (AMAT)
Applied Materials (NASDAQ:AMAT) continues to be an indispensable part of the global chip and semiconductor sector, supplying the equipment, services, and software needed to manufacture the semiconductors and microchips that are found in computers, smartphones, TVs, and other electronics.
Year to date, the AMAT stock rocketed about 51% higher this year and is up 275% over five years. However, the valuation of Applied Materials’ stock still looks reasonable at 19 times forward earnings estimates. Compare that to the price-earnings (P/E) ratio of microchip and semiconductor company Nvidia (NASDAQ:NVDA). which is currently at 110. A mature company, Applied Materials is also one of the few chip companies to pay its shareholders a dividend. Currently, AMAT stock offers a quarterly payout of 32 cents a share for a yield of 0.87%. Not huge, but better than nothing, which is what most chip stocks pay.
Apple (AAPL)
Apple (NASDAQ:AAPL) has taken some knocks lately, creating a buying opportunity. Granted, the stock did decline on news the Chinese government is banning government workers from using iPhones. However, Apple remains a top growth stock and technology company that investors should buy and hold for the long haul. After all, it’s been through far worse.
The company’s market capitalization surpassed $3 trillion earlier this year, its earnings remain strong as it aggressively grows service offerings that include Apple Pay and Apple TV. It’s also cash-rich, enabling the company to buy back more of its own stock. With a new augmented reality headset coming to market and a loyal customer base, Apple remains a winner. AAPL stock has increased 40% this year and is up 214% over five years.
Undervalued Growth Stocks: Oracle (ORCL)
Oracle (NYSE:ORCL) fell more than 10% after the company’s second-quarter financial results. While its earnings per share (EPS) of $1.19 was ahead of expectations for $1.15, revenue came in at $12.45 billion. That was below the $12.47 billion that was expected by analysts. The real problem though was the forward guidance that Oracle provided, though.
Oracle now expects to see $1.30 to $1.34 per share. and 5% to 7% revenue growth in its third quarter. Analysts had expected $1.33 in EPS and $13.28 billion in revenue, which implies 8% revenue growth. Management said earnings continue to be impacted by the integration of Cerner, the electronic health records software company that Oracle acquired last year. Also, Oracle’s cloud business continues to grow by leaps and bounds, where revenues grew about 66% year over year.
Helping, the company pays a quarterly dividend of 40 cents a share, for a yield of 1.43%.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) just announced a new deal that will see it supply fifth-generation (5G) wireless Internet microchips to Apple. In fact, the new deal replaces one that Qualcomm had in place with Apple since 2019 that was due to expire by year’s end.
We should add that the new deal with Apple was a welcome relief to QCOM shareholders and was applauded by analysts. Hopefully, the new contract with Apple will ignite a spark in Qualcomm’s share price. Over the last 12 months, the stock has decreased by 10%. Even better, Qualcomm pays a quarterly dividend of 80 cents a share, which gives it a hefty yield of 2.82%. Qualcomm is another undervalued growth stock to buy.
Undervalued Growth Stocks: Lululemon (LULU)
Not all growth stocks are in technology. Take, for example, Lululemon (NASDAQ:LULU), the popular athletic apparel retailer. The company’s share price has increased 155% over the last five years, though it has only gained about 16% in the past 12 months. LULU stock is also currently trading nearly 20% below the all-time high it reached in November 2021 when the broader stock market reached its zenith. The company’s yoga pants and other workout clothes became extremely popular during the pandemic as people worked from home.
Lululemon continues to post strong earnings. Most recently, it reported its fiscal second-quarter profit rose 18% from a year earlier amid robust sales in China. Specifically, the company said its revenue in China rose 61% year-over-year in fiscal Q2. Lululemon is now forecasting sales of between $9.51 billion and $9.57 billion, up from a previous range of $9.44 billion to $9.51 billion. Profits for the current fiscal year are expected to be between $12.02 and $12.17 per share, also up from previous guidance.
McDonald’s (MCD)
Fast food giant McDonald’s (NYSE:MCD) has traditionally been a reliable growth stock. Trading at 26 times future earnings estimates and offering a dividend of $1.52 per share for a yield of 2.15%, there are still plenty of reasons to invest. MCD stock recently caught an analyst upgrade from Wells Fargo (NYSE:WFC), with a price target of $310 per share.
McDonald’s also reported better-than-expected second-quarter earnings. In addition, given its comparatively low prices and popular dollar menu, McDonald’s is the type of company where sales remain strong in any economic environment. Like Lululemon, McDonald’s says its recent earnings outperformance was given a boost by strong sales in China, where same-store sales rose 14% from a year earlier. The company also continues to gain traction from promotions, particularly ones aimed at kids such as its popular “Grimace Birthday Meal.”
Salesforce (CRM)
We’ll end where we began with technology and cloud computing giant Salesforce (NYSE:CRM). After enduring poor earnings, executive departures, and challenges from activist shareholders, Salesforce looks to be back on track. The company recently reported Q2 financial results that crushed Wall Street forecasts, sending its stock up 6%. Salesforce reported EPS of $2.12 versus $1.90 that had been penciled in by analysts. Revenue totaled $8.60 billion compared to $8.53 billion that was anticipated. The company’s revenue increased 11% from a year earlier.
Salesforce said it saw growth in all five of its product categories during Q2 and added that it sees further expansion through artificial intelligence (AI), which was music to the ears of analysts and investors. The company also announced an AI cloud computing product that will include tools for marketing and data analytics, which was also roundly applauded. Looking forward, the company expects EPS of $2.05 to $2.06 on $8.7 billion to $8.72 billion in revenue for Q3. While CRM stock has gained more than 60% this year, it is only up 40% over the past five years and is 30% below its all-time high.
On the date of publication, Joel Baglole held long positions in AMAT, NVDA and AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
