As inflation gets hotter than expected, finding undervalued stocks is trickier than ever. Mega-cap market drivers like Nvidia (NASDAQ:NVDA) may enter correction territory as shares in the specific stock dropped nearly 10% since March highs.
Even when (or if) inflation cools consistently, the prices of goods and services remain much higher than they were just two years back. This discrepancy stems from how inflation reflects ongoing price growth rather than the actual price differences, leading to consistently low consumer confidence despite what the inflation rates suggest.
At the same time, high-flying tech stocks are becoming prohibitively expensive for the average retail trade — making undervalued stocks a top play in today’s market. Being affordably priced, they offer an opportunity for investors to accumulate shares reasonably. These undervalued stocks stand on the brink of rapid growth thanks to particular favorable circumstances and bullish momentum, laying the groundwork for their future success.
Perimeter Solutions (PRM)
Perimeter Solutions (NYSE:PRM) stands out as an undervalued stock for riches, primarily due to its relative obscurity. Specializing in firefighting equipment and essential fire suppression and extinguishment chemicals, the company has seen significant growth since 2010.
Perimeter announced a 7.2% CAGR in its total addressable market size since 2010, with expectations for this market to reach $100.2 billion by 2027, fueled by consistent demand for firefighting equipment. The company is on a solid growth path, mirroring the wider market, with sales surpassing $322 million last year.
Aiming to “provide private equity-like returns with the liquidity of a public market,” Perimeter has successfully met this target, proving itself a prime investment option for those looking for undervalued stocks in today’s market. At the same time, with a price-to-book ratio of merely 0.95x, Perimeter represents a distinct small-cap value opportunity among the wider undervalued stocks segment.
Sirius XM Holdings (SIRI)
When Warren Buffett says a stock is undervalued, pay attention. This focus makes Sirius XM Holdings (NASDAQ:SIRI) stand out as a remarkable choice among undervalued stocks, thanks to the billionaire’s investment. Even as Buffett’s Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B) appeared more inclined toward selling than purchasing, his investment of $167 million in Sirius XM signals a positive indicator for value investors. Considering the wider market skepticism, it’s an even more noteworthy play, with Sirius XM being one of the most heavily shorted stocks today at 21% short interest. But why is Buffett optimistic about this stock?
Buffett’s interest in Sirius XM extends beyond mere corporate restructuring; he views it as a quintessential value investment. Despite trading at low multiples, Sirius XM promises a high-flying future. The company distinguishes itself as a cash-generating megalith, with EBITDA margins exceeding 30% for the last four years and maintaining a free cash flow of over $1 billion. Moreover, Sirius XM offers a solid dividend yield of 4.69% with a payout ratio of 31%, showcasing its leadership’s efficient cash management in rewarding shareholders while strategically adjusting its market presence.
Steelcase (SCS)
Steelcase (NYSE:SCS) emerges as a robust, undervalued industrial stock, crafting high-end office furniture for enterprise clients and remote workers. While I don’t hold shares in the company, my current experience sitting in a Steelcase chair daily speaks volumes about its quality — suggesting a bright future for the stock if it mirrors its performance!
In the last year, Steelcase has seen its value increase by nearly 50% and now offers investors a 3.06% forward dividend yield. This is a significant return for a company with a market cap under $1.5 billion. However, investors seeking undervalued stocks should look beyond dividends. Instead, focus on Steelcase’s steady revenue and sharp increase in net income, reported at $777 million and $30.8 million, respectively, in its most recent quarterly report.
The outlook for fiscal year 2025 looks exceptionally bright for Steelcase as it capitalizes on a stabilizing economy and the ongoing remote work trend. In the first three weeks of the fiscal year alone, the company has seen a 10% sales boost and is targeting 1% to 5% revenue growth with an EPS of $0.85 to $1.00. With the year-end EPS at $0.68, the executive team’s optimistic outlook further solidifies Steelcase as a compelling, undervalued stock in today’s inflated market.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
