Cutting through the noise to find the best undervalued stocks for your portfolio is almost impossible without understanding the best metrics to use and how to develop a methodology to capture the top investment options.
So which undervalued stocks are the best to buy now or add to your watchlist? PayPal Holdings, Capital One, Halliburton Comp, JD.com Inc, alongside Devon Energy Corp, Comcast Corp and Baidu have been suggested this month by our InvestingPro AI/Analyst hybrid.
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What Is An Undervalued Stock?
An undervalued stock is one that is priced below its intrinsic value, meaning the market price is lower than what the stock is fundamentally worth based on factors like earnings, dividends, growth potential, and financial health. Investors look for undervalued stocks because they believe the market has mispriced them, presenting a potential opportunity for profit when the stock’s true value is recognized and its price increases.
Our Methodology For Picking Undervalued Stocks
The following stocks are our Pro Picks for this month, taken from S&P 500-listed companies with a market capitalization of more than 15 billion USD, a solid Price-to-Earnings (P/E) Ratio between 1 and 20, and a fair value upside greater than 25%, meaning that the stock is either undervalued, or a bargain (based on 5 overlaid investing models and analyst assessments).
All of these companies have also earned InvestingPro health scores of ‘Good’, ‘Great’, or ‘Excellent’, which for the last 7 years has indicated outperformance vs. the S&P 500. A score this high points to a mix of first-rate financials: excellent earnings, cash flow, and growth vs. peers in its sector.
Best Undervalued Stocks In October 2024
Company Name | Stock Symbol | Sector | Fair Value upside |
---|---|---|---|
PayPal Holdings | PYPL | Financial Services | 33.4% |
Capital One | COF | Consumer Finance | 32.3% |
Halliburton Comp | HAL | Energy Equipment | 41.4% |
JD.com Inc | JD | Broadline Retail | 32.8% |
Devon Energy Corp | DVN | Oil, Gas & Consumable Fuels | 35.6% |
Comcast Corp | CMCSA | Media | 35.8% |
Baidu | BIDU | Interactive Media & Services | 66.1% |
1. PayPal Holdings (PYPL)
- Market Cap ($ Billion): 79.08
- Fair Value: $103.22
- Fair Value Upside: 33.4%
PayPal Holdings, Inc. operates a technology platform that enables digital payments on behalf of merchants and consumers worldwide. It operates a two-sided network at scale that connects merchants and consumers that enables its customers to connect, transact, and send and receive payments through online and in person, as well as transfer and withdraw funds using various funding sources. The company provides payment solutions under the PayPal, Venmo, Zettle, Hyperwallet and Honey names (amongst others). The company was founded in 1998 and is headquartered in San Jose, California.
2. Capital One (COF)
- Market Cap ($ Billion): 55.877
- Fair Value: $193.80
- Fair Value Upside: 32.3%
Capital One Financial Corporation operates as a financial services holding company, which engages in the provision of various financial products and services in the United States, Canada, and the United Kingdom. It operates through three segments: Credit Card, Consumer Banking, and Commercial Banking. The company accepts checking accounts, money market deposits, negotiable order of withdrawals, savings deposits, and time deposits. Its loan products include credit card loans; auto and retail banking loans; and commercial and multifamily real estate, and commercial and industrial loans. The company also offers credit and debit card products; online direct banking services; and provides advisory, capital markets, treasury management, and depository services. It serves consumers, small businesses, and commercial clients through digital channels, located in New York, Louisiana, Texas, Maryland, Virginia, New Jersey, and California. The company was founded in 1988 and is headquartered in McLean, Virginia.
3. Halliburton Comp (HAL)
- Market Cap ($ Billion): 25.48
- Fair Value: $40.22
- Fair Value Upside: 41.4%
Halliburton Company provides products and services to the energy industry worldwide. It operates through two segments, Completion and Production, and Drilling and Evaluation. The Completion and Production segment offers production enhancement services. This segment also provides electrical submersible pumps, as well as artificial lift services, pipeline and process services and decommissioning; and specialty chemicals and services. The Drilling and Evaluation segment offers drilling fluid systems, performance additives, completion fluids, solids control, specialized testing equipment, and waste management services; drilling systems and services; wireline and perforating services; and drill bits and services, as well as coring equipment and services. This segment also provides cloud based digital services and artificial intelligence solutions on an open architecture for subsurface insights, integrated well construction, and reservoir and production management; testing and subsea services, such as acquisition and analysis of reservoir information and optimization solutions; and project management and integrated asset management services. Halliburton Company was founded in 1919 and is based in Houston, Texas.
- Market Cap ($ Billion): 48.61
- Fair Value: $48.41
- Fair Value Upside: 32.8%
JD.com, Inc. operates as a supply chain-based technology and service provider in the People’s Republic of China. The company offers computers, communication, and consumer electronics products, as well as home appliances; and general merchandise products. It also provides online marketplace services for third-party merchants. In addition, the company develops, owns, and manages its logistics facilities and other real estate properties to support third parties. Further, it provides integrated data, technology, business, and user management industry solutions to support the digitization of enterprises and institutions. The company was formerly known as 360buy Jingdong Inc. and changed its name to JD.com, Inc. in January 2014. JD.com, Inc. was incorporated in 2006 and is headquartered in Beijing, the People’s Republic of China.
5. Devon Energy Corp (DVN)
- Market Cap ($ Billion): 24.92
- Fair Value: $53.30
- Fair Value Upside: 35.6%
Devon Energy Corporation, an independent energy company, engages in the exploration, development, and production of oil, natural gas, and natural gas liquids in the United States. It operates in Delaware, Eagle Ford, Anadarko, Williston, and Powder River Basins. The company was founded in 1971 and is headquartered in Oklahoma City, Oklahoma.
6. Comcast Corp (CMCST)
- Market Cap ($ Billion): 157.2
- Fair Value: $55.24
- Fair Value Upside: 35.8%
Comcast Corporation operates as a media and technology company worldwide. Its Residential Connectivity & Platforms segment provides residential broadband and wireless connectivity services, residential and business video services, sky-branded entertainment television networks, and advertising. The Media segment operates NBCUniversal’s television and streaming business, including national and regional cable networks; and Peacock, a direct-to-consumer streaming service. It also operates international television networks comprising the Sky Sports networks, as well as other digital properties. The Studios segment operates NBCUniversal and Sky film and television studio production and distribution operations. The Theme Parks segment operates Universal theme parks in Orlando, Hollywood, Osaka, and Beijing. The company also offers consolidated streaming platforms. Comcast Corporation was founded in 1963 and is headquartered in Philadelphia, Pennsylvania.
- Market Cap ($ Billion): 32.96
- Fair Value: $168.31
- Fair Value Upside: 66.1%
Baidu, Inc. (Baidu) is a leading artificial intelligence (AI) company with strong Internet foundation. The company is in the midst of a broad-based platform shift driven by generative AI and foundation models, that is set to revolutionize every industry. The company launched ERNIE Bot, its conversational AI bot powered by ERNIE, its in-house foundation model, in 2023. The company has used ERNIE Bot and ERNIE to reinvent its products and offerings in order to provide AI-native experiences. The company was formerly known as Baidu.com, Inc. and changed its name to Baidu, Inc. in 2008.
How To Find The Best Undervalued Stocks
We’ve only listed a handful of companies that we found using the InvestingPro Advanced Screener. To compare the rest of the list, simply follow these steps:
- Visit the InvestingPro Stock Screener tool
- Select the following filters
- For U.S.-centric stocks, select ‘United States’ under the ‘Trading Region’ tab drop-down, and make sure to check (select) the ‘Primary Trading Item’ option.
- You’ll then see the list of all the companies falling in the desired screener filters’ range, arranged in a descending order.
Best Undervalued Stocks Frequently Asked Questions (FAQ)
Q. What is an undervalued stock?
An undervalued stock is one that is trading at a price lower than its intrinsic value, which is determined by analyzing its fundamentals such as earnings, dividends, growth potential, and financial health. Investors believe these stocks are mispriced by the market, presenting opportunities for profit when the true value is realized.
Q. How can I identify an undervalued stock?
Identifying undervalued stocks involves fundamental analysis, which includes examining financial statements, valuation metrics (like P/E and P/B ratios), dividend yields, and the company’s growth potential. Comparative analysis with industry peers and discounted cash flow (DCF) analysis are also useful techniques.
Q. Why do stocks become undervalued?
Stocks can become undervalued due to various factors including negative market sentiment, lack of information or misunderstandings about the company, temporary issues affecting the company, or broader economic cycles and downturns impacting the sector.
Q. Is it safe to invest in undervalued stocks?
Investing in undervalued stocks can be profitable, but it carries risks. The stock may be undervalued for a good reason, such as declining business prospects or industry challenges. It’s important to conduct thorough research and consider the company’s long-term potential before investing.
Q. What is the difference between an undervalued stock and a value trap?
An undervalued stock has the potential to appreciate in value as the market corrects its pricing error. A value trap, on the other hand, appears cheap but continues to underperform due to fundamental problems in the business that prevent price appreciation.
Q. Can undervalued stocks provide good dividend yields?
Yes, undervalued stocks can offer attractive dividend yields. High dividend yields may indicate undervaluation, especially if the company has strong financial health and a sustainable dividend payout ratio. However, high yields can also signal potential trouble, so it’s important to analyze the company’s ability to maintain dividends.
Q. How long should I hold an undervalued stock?
The holding period for an undervalued stock depends on individual investment goals and the specific stock. Some undervalued stocks may realize their true value quickly, while others might take longer. Patience is often required, and it’s important to periodically reassess the stock’s fundamentals and market conditions.
Q. Are there specific industries where undervalued stocks are more common?
Undervalued stocks can be found in any industry, but they are often more common in sectors experiencing temporary difficulties, economic downturns, or undergoing significant change. Cyclical industries like energy, materials, and financials may present more opportunities for finding undervalued stocks.