3 Top Value Stocks To Watch In The Stock Market Today
Everyone wants more for less, and an investment in the stock market is no exception. While a cheap stock is not necessarily a good investment, it may also not be a bad one. What we are really interested in are value stocks. They are usually highly established companies that tend to trade at lower prices relative to their fundamentals, such as earnings and sales. For instance, companies with lower price/earnings (P/E) ratio are often considered to be value stocks.
Investors are on the lookout for top-value stocks as many rotate out of growth stocks amid inflation fears. The general rationale for owning value stocks is that long-term returns are more achievable if you buy a stock when it is undervalued compared to its future prospects.
Are Value Stocks The Right Investment For You?
Value stocks may not have flashy characteristics or be as exciting as some of the hyper-growth names. But since they are trading at a discount to their intrinsic value, they are likely to outperform the stock market over time. But finding them isn’t as straightforward as it seems. After all, if it were so easy to find stocks with great discounts, we would all be millionaires. Even if it’s easy, not many are willing to invest in them because they tend to be slow in generating sizable returns.
Assuming you’re keen on value investing, you could start by utilizing some of the screening tools from your brokerage. No discussion of stock prices would be complete without referencing the P/E ratio. While a relatively low P/E ratio may indicate a buying opportunity, it’s important to note that no single metric can confirm that a potential investment is undervalued. In this article, let’s look at some of the best value stocks in the stock market today for investors who have a long-term horizon.
Best Value Stocks To Watch Right Now
- Alibaba (NYSE: BABA)
- Walmart (NYSE: WMT)
- Nike (NYSE: NKE)
Alibaba
First, up the list, we have one of the largest e-commerce companies in the world, Alibaba. Just as we have Amazon (NASDAQ: AMZN) in the U.S., some consider Alibaba as the Amazon of China. Both companies have one thing in common, they are both tech-driven companies that have expanded beyond their core e-commerce divisions. The company could be a potential value stock to bet on the biggest e-commerce industry in the world. Better still, the industry could grow at a compound annual growth rate of 12.4% by 2024.
It has been a historic fiscal year for the company as it reached a milestone of 1 billion annual active users globally. Revenue came in 64% higher year over year to $28.6 billion. However, the company recorded a net loss of $1.16 billion. This can be attributed to the $2.8 billion fine levied by China’s State Administration for Market Regulation according to China’s Anti-monopoly Law. While there’s regulatory uncertainty over alleged anti-competitive practices, its diversified business model and healthy growth rate make up for these challenges.
With a forward P/E ratio of 17.7, Alibaba is significantly cheaper than the S&P 500 average of 44. And if we are to compare it with the forward P/E ratios of Amazon or Shopify (NYSE: SHOP), which are at 44 and 249 respectively, this would make BABA stock look like a steal. Of course, one likely explanation for the discount could have something to do with the regulatory uncertainty. With BABA stock trading at a fraction of its industry peers, would you consider BABA stock to be one of the best value stocks to buy in the stock market today?
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Walmart
Next, we will be looking at the world’s largest retailer, Walmart. Through its massive network of hypermarkets spanning 24 countries, the company continues to dominate the retail space. According to Walmart, they have 10,000 stores that cater to an estimated 220 million customers and members globally. Notably, Walmart reported earnings per share of $1.69 on revenue of $138.3 billion for the quarter, beating Wall Street’s estimates. According to CEO Doug McMillon, this is mostly thanks to Walmart’s rapidly growing e-commerce sales.
Looking forward, the company also seems confident, raising its full-year 2021 earnings outlook on anticipated “pent-up demand throughout 2021”. While its brick-and-mortar business remains rock-solid, the company’s e-commerce business is also growing fast. The management expressed confidence that the growth of marketplace, fulfillment, and advertising can lift profit margins for the company as a whole.
Despite the blowout quarterly report, Walmart trades at a forward P/E ratio of less than 23, which seems like a value deal in today’s frothy market. The company acquired virtual fitting room company Zeekit, marking a push into the apparel market. Considering the strong fundamentals, do you have WMT stock in your list of top value stocks to buy?
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Nike
Nike is a retail giant that develops and sells athletic apparel and equipment. In essence, it is the world’s largest supplier of athletic shoes and apparel. It is a major manufacturer of sports equipment and is one of the most valuable brands among sports businesses. Nike markets its products under its own brand, as well as Nike Golf, Air Jordan, Air Force 1, Air Max, and Nike CR7 among others.
This year, things haven’t been smooth for the Oregon-based sneaker and apparel company. For those unfamiliar, Nike has had a boycott of its products in parts of China and some supply chain problems. These factors could help explain why NKE stock has pulled back about 8% since reaching a 52-week high of $147.95 in mid-March. As these will not have any major impact in the long run, it is highly likely to be a temporary speed bump for the company. Nike is slated to release its fourth-quarter fiscal 2021 financial results on June 24 after the market closes.
From the company’s third-quarter financials for fiscal 2021, revenue came in 3% higher to $10.4 billion for the quarter. It is Nike Direct sales were $4 billion, up by 20% on a reported basis. Its digital sales increased by 59% given the circumstances of the coronavirus pandemic. All these numbers could imply that Nike’s brand momentum is as strong as ever. Besides, it continues to drive focused growth in its largest opportunities. With that in mind, will you consider adding NKE stock to your portfolio?
