These 3 Stocks Could Be Great Deals At Current Levels
It doesn’t matter what you are buying, nothing compares to the feeling of getting a good deal. That can certainly hold true in the stock market, as adding shares of great companies that have pulled back substantially from their recent highs can help you generate strong returns for your portfolio.
With so many stocks facing heavy selling pressure over the last few months, investors are almost spoiled for choice when it comes to adding new positions at intriguing price levels. On the other hand, it’s important to note that many of these beaten-up stocks might take years to get back to 52-week highs.
That’s why it's important for investors to be extra selective when bargain hunting for stocks. One of the best ways to judge a good deal in the market is to look at a company’s valuation and overall business model. In the end, if you believe that a company has strong growth prospects and can outperform its current multiples, it might be worth adding to your plans.
We’ve put together a list of 3 stocks for bargain hunters to buy now to help you get a better idea of the types of investment opportunities to look for in this challenging market environment.
1. United Rentals
This leading equipment rental company has pulled back over 23% from its all-time intraday high last November and could be a great deal to consider at this time. United Rentals (NYSE:URI) is the largest equipment rental company in the world, serving its customers through an integrated network of over 1,100 rental locations in the U.S. and Canada. It’s a company with a leading market position that is trading at an attractive valuation, which is usually a recipe for success in investing.
With a forward P/E ratio of 11.6, United Rentals trades at a significant discount to the S&P 500 and could be a steal at current levels. Two key factors should lead to strong earnings for the equipment rental giant, huge amounts of federal infrastructure spending in the coming months and a bounce back in construction activity as the economy rebounds from the pandemic.
It’s also a bit puzzling that shares have underperformed in recent months given that United Rentals posted Q4 adjusted EPS that increased by 47% year-over-year.
2. Netflix
The recent post-earnings move in Netflix is a stern reminder of how quickly sentiment can change in today’s market. The stock is down over 42% from its all-time high from last November and continues to be one of the more volatile names in the tech sector.
While it’s hard to say if the stock has officially found its bottom, investors that have been looking to establish a long-term position in Netflix NASDAQ:NFLX) should certainly be interested after the recent selloff. The stock is trading at the low end of its historical valuation metrics, which means adding shares of the leading subscription entertainment service company could end up being a bargain if you can stomach some volatility.
It’s important for investors to note that the sharp selloff was the result of Netflix missing its subscriber growth guidance in Q4 and providing weak forward guidance. With that said, the company recently increased its subscription prices, has a lot of room for growth in international markets, and expects to be free cash flow positive in 2022, all strong factors to consider.
Iconic hedge fund investor Bill Ackman recently announced he added 3.1 million shares of Netflix for Pershing Square Capital Management after the recent selloff, which is a significant vote of confidence in this company for investors to consider.
3. Digital Turbine
All is not well in growth land, evident in the fact that past winners like Digital Turbine (NASDAQ:APPS) have been sold relentlessly over the last year. The stock is down over 49% from a year ago but might have bottomed out, which means it's worth a look for a potential starter position.
While there might still be some volatility ahead in growth names, particularly around the next FOMC meeting, bargain-hunting investors that are open to allocating a small amount of capital to quality growth stocks should check this name out. Digital Turbine is a provider of an end-to-end solution for mobile technology companies to enable advertising and monetization solutions.
This is the type of software that should be in high demand over the next decade as more people around the world gain access to smartphones and the digital advertising industry continues gaining momentum. The stock trades at a forward P/E ratio of 27.46, which is a lot more reasonable than many other names in the growth space and has an analyst price target consensus of $109.80 according to MarketBeat, implying 145% of upside from current levels.
Digital Turbine will report its Q3 earnings on Feb. 8, so keep an eye on how shares react to the report.