3 Undervalued Stocks Set to Outperform the Market in 2024

  • Strong operational efficiency drives sustainable growth across all three companies.
  • McDonald’s (MCD): Achieves 13 consecutive quarters of positive comparable sales growth.
  • Johnson & Johnson (JNJ): Delivers strong MedTech sales.
  • Nike (NKE): Reports solid consolidated bottom-line growth with double-digit sales growth.
Undervalued Stocks - 3 Undervalued Stocks Set to Outperform the Market in 2024

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During stock investing, having a list of the top undervalued stocks can offer lucrative opportunities for value growth and portfolio stability. Here are three stocks whose intrinsic value exceeds their current market price, promising potential gains as the market corrects itself. The fundamentals that drive these stocks are operational efficiency, market penetration and innovation. These elements support these companies’ ability to capitalize on the inefficiencies of the restaurant, pharmaceutical and footwear markets. The trio exemplifies the concept of undervaluation with their solid performance metrics and strategic initiatives.

The first company continues to dominate the fast-food sector with consistent revenue growth and global expansion plans. Similarly, the second one’s prowess in medical technology is evident through its innovative product offerings and strategic acquisitions, bolstering its market position. Finally, the third company maintains a market lead in athletic footwear and apparel, strong segment sales and high bottom-line growth. In short, the focus is on these companies’ financial health, strategic initiatives and market outlook to assess why they are considered undervalued. 

McDonald’s (MCD)

image of McDonald's (MCD) golden arches on a pole indicating a drive-through area with the sky at dusk in the background
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McDonald’s (NYSE:MCD) is a global fast-food giant that operates a chain of restaurants offering various menu items like burgers, fries and beverages. The company had 13 consecutive quarters of comparable sales growth. Over the last four years, it has achieved 30% growth, indicating strong momentum in increasing sales from existing stores.

Moreover, consolidated revenues for Q1 2024 were over $6 billion, reflecting a 5% increase annually (FX-neutral). Systemwide sales across loyalty markets were nearly $25 billion for the trailing twelve-month period, highlighting robust customer engagement and spending. These figures signify McDonald’s substantial revenue base and its capacity to generate significant cash flow. The adjusted operating margin for the quarter was nearly 45%, indicating strong operational efficiency and cost management. 

Additionally, McDonald’s focuses on accelerating its restaurant expansion. The company may hit 50,000 restaurants by the end of 2027. Recent openings, including the 6,000th restaurant in China, signify ongoing global expansion efforts. Positive comparable sales exist in key international markets like the U.S., U.K., Germany and Japan. This indicates solid market penetration and competitive positioning.

Overall, McDonald’s constant top-line growth and global expansion efforts solidify its position among the top undervalued stocks. 

Johnson & Johnson (JNJ)

Negative Press Presents a Buying Opportunity with JNJ Stock
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Johnson & Johnson (NYSE:JNJ) is involved in pharmaceuticals, medical devices and consumer health products. The company’s MedTech segment sales were $7.8 billion, Which shows an annual operational growth of 6.3%. Specific products like electrophysiology devices saw significant double-digit growth rates of 25.9%, driven by global procedure growth and new product adoption. This growth highlights Johnson & Johnson’s ability to innovate and capture market share in high-demand medical technologies. Moreover, the adjusted income before tax margin for the enterprise increased from 36.1% to 36.8%. This is despite various operational challenges and impacts (like fewer selling days in orthopedics).

Indeed, acquiring Shockwave Medical and Ambrx aligns with the company’s strategy to enrich its portfolio. Hence, the acquisitions solidify Johnson & Johnson’s competitive edge with advanced technologies and potent pipeline assets. As a result, these acquisitions expand the company’s product offerings in cardiovascular disease treatment and oncology. Finally, there are investments of $3.5 billion in research (16.6% of top-line), reflecting a focus on pipeline advancement and growth.

In short, Johnson & Johnson’s advanced product pipeline and strategic acquisitions make it an appealing choice among the top undervalued stocks.

Nike (NKE)

A stack of red Nike (NKE) shoe boxes.
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Nike (NYSE:NKE) leads the market in athletic footwear, apparel, equipment and accessories. The company’s fiscal 2024 had a solid performance with a high bottom-line uplift. Nike’s EPS grew by 15% for the full year, and the basketball segment saw double-digit growth in Q4 across various demographics, driven by innovations such as the GT Cut, Kobe’s new footwear and apparel and the Sabrina 1. The Sabrina 1 alone captured two points of market share in the U.S. basketball market. Signing prominent athletes and successful marketing campaigns, like the one celebrating Jayson Tatum’s NBA Finals title, further bolstered the brand’s position in the basketball market.

Despite overall challenges (Road Running market) in the running segment, new releases such as Vomero, Invincible, Infinity and Structure showed double-digit growth in Q4. The launch of the Pegasus 41, supported by a comprehensive marketing campaign, received strong consumer reviews and better-than-expected sell-through rates. Indeed, the strategic focus on simplifying the retail structure and highlighting key cushioning technologies may drive future growth in this competitive segment.

To conclude, Nike’s strong segment sales growth and high bottom-line uplift support its high mark among the top undervalued stocks. 

As of this writing, Yiannis Zourmpanos held a long position in JNJ. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or
indirectly) any positions in the securities mentioned in this article.

Yiannis Zourmpanos is the founder of Yiazou Capital Research, a stock-market research platform designed to elevate the due diligence process through in-depth business analysis.


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