These overlooked value stocks are strong investments and also deals that analysts think are setting to move higher
Everyone loves a sale. That’s as true in a supermarket as it is in the stock market. Consumers and investors are always on the lookout for goods, services, and equities that are fundamentally undervalued. This led us to create our list of overlooked value stocks.
It’s also essentially the definition of a value stock: One that trades below levels associated with its underlying fundamentals. The reason that a given stock ends up undervalued is usually perception. the market perceives one or more confounding factors as justification for lower prices. Sometimes perception continues to match reality and in that case value stocks tend to continue to trade lower.
However, that isn’t always the case and many times perception shifts and those previously undervalued shares rise in price. Multiple factors suggest that is the case of the companies discussed below. Analysts believe that these value stocks are positioned to rise in price substantially.
Darling Ingredients (DAR)
Darling Ingredients (NYSE:DAR) Is an excellent example of a value stock that analysts expect to soar in price moving forward. The company primarily sells animal byproducts and is a major contributor to the circular economy. As its website states, about 50% of an animal makes it to the dinner plate. The other 50% Requires innovation in order for Value to be created therefrom.
Darling Ingredients is one of those innovators: the company provides collagen, gelatin for capsules, And all kinds of other animal byproducts that would otherwise be wasted.
Yet despite the success of the company and strong analyst sentiment, its stock currently only trades for approximately $43. The nine analysts currently covering darling ingredients agree on average that it’s closer in value to $80.
One of the more encouraging signs suggesting that its price will increase is its P/E ratio. It currently sits below 10 but has a median value of nearly 22 over the past 10 years. The company has grown its revenues quickly over the past three years which is one reason to believe that investors will again be looking to pay more for a dollar of its earnings moving forward.
McDonald’s (MCD)
McDonald’s (NYSE:MCD) Is one of the better known value stocks available to investors. Yet, it’s also fair to argue that McDonald’s remains overlooked. While it currently has modest upside per the consensus target outlook, it does have roughly 20% upside potential based on the high target price.
In order to achieve that ambitious growth Target McDonald’s will need to grow. That is precisely what the company aims to do. Back in December, the company announced that it Is targeting 50,000 restaurants by 2027. In order to reach that goal, it will be entering the fastest period of development in its history.
The company intends to leverage its loyalty programs and a partnership with Google that utilizes its cloud technology. McDonald’s is also taking aim at Starbucks through its Cosmcs beverage concept restaurants. The company is likely to increase the number of trial locations to 10 this year. Early indications are that demand is strong and the high margin drinks that the company sells certainly have the potential to produce growth at the corporate level. If you are going to invest in any of these overlooked value stocks, start with this one.
Albemarle (ALB)
Albemarle (NYSE:ALB): shares are offering extraordinary value to investors currently. The stock collapsed throughout 2023 as the hot lithium market caved in on itself.
That said, Albemarle’s fundamental situation remains strong. The company released earnings Feb. 14 That showed revenues increased by 31% throughout 2023. That led to a net income of $1.6 billion, the second highest ever in the company’s history. Perhaps then it should come as no surprise that analysts agree that albemarle’s shares are poised to soar in the future.
However, sales in the fourth quarter did decline by 10%. EV sales growth is slowing, particularly in China, though not declining. However, the outlook continues to be strong. Long-term demand for lithium is positive. Yet, the Chinese economy is experiencing a broad slowdown which only complicates matters.
One reason for bullishness is the simple fact that energy firms including ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX) are expressing interest in the lithium industry. Albemarle is one of the easiest investments to make for those who see the value. The company is one of the largest lithium firms on the planet and absent a complete EV collapse, its future is secure. This is one of the most overlooked value stocks out there.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.