Because investors remain concerned about the pace of economic recovery due to the resurgence of the COVID-19 cases, the stock market is expected to remain volatile in the near term. According to an AP report, the United States recorded 26,800 COVID-19 deaths and more than 4.2 million infections in August.
Also in August, the consumer price index (CPI) increased 5.3% from a year earlier and 0.3% from July, which was a lower increase than was expected. In addition, during the Federal Reserve’s recent annual Jackson Hole economic symposium, Fed Chair Jerome Powell reiterated that high inflation is temporary. With these factors buoying investors, quality stocks trading at affordable prices could be wise bets now.
Fundamentally sound stocks Telefonaktiebolaget LM Ericsson (publ) (ERIC), Telefónica, S.A. (TEF), and CNH Industrial N.V. (CNHI) are currently trading below $20 per share and look undervalued considering their growth prospects. So, we think it could be wise to scoop up their shares now.
Telefonaktiebolaget LM Ericsson (publ)(ERIC)
ERIC provides communication infrastructure, services, and software solutions mainly to the telecom industry. The company operates through four segments: Networks; Digital Services; Managed Services; and Emerging Businesses. The company is based in Stockholm, Sweden.
On August 30, 2021, ERIC announced that it was expanding its portfolio of 5G radios with three new offerings geared toward urban environments. Part of Ericsson Street Solutions, these radios should allow communications service providers to build robust 5G service across all bands in urban environments while blending in seamlessly with the cityscapes.
For its second quarter, ended June 30, 2021, ERIC’s revenue increased 10% sequentially to SEK54.9 billion ($6.41 billion). The company’s net income increased 50% year-over-year to SEK 3.9 billion ($460 million). Also, its EPS came in at SEK 1.10, up 49% year-over-year.
In terms of forward non-GAAP P/E, ERIC’s 15.80x is 37.2% lower than the 25.15x industry average. The stock’s forward EV/S and P/S of 1.38x and 1.44x, respectively, are lower than the 4.15x and 4.11x industry averages.
ERIC’s revenue is expected to come in at $27.41 billion in the current year, representing an 8.5% year-over-year rise. In addition, the company’s EPS is expected to increase 11.1% year-over-year to $0.7 in the current year. Over the past year, the stock has gained 7.6% in price to close yesterday’s trading session at $11.70.
It’s no surprise that ERIC has an B overall, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting. In addition, it has an A grade Value, and a B grade for Stability.
Telefónica, S.A. (TEF)
Headquartered in Madrid, Spain, TEF provides telecommunications products and services, including mobile, fixed-line telephony, and digital services. The company serves more than 337 million customers and offers traditional fixed telecommunication services, internet, broadband multimedia services, data and business solutions services, and a range of digital services.
On August 10, 2021, TEF formed a collaboration between Telefónica Tech, TEF’s digital branch, and ATCSC, the cyber security arm of Saudi Arabia’s stc. Telefónica Tech’s International Markets Sales VP, Rames Sarwat, said, “The agreement with ATCSC will allow us to share knowledge on the best techniques to detect and resolve threats in our respective markets, which is essential given the current international expansion of businesses.”
TEF’s revenue increased 3.4% year-over-year to €9.96 billion ($11.70 billion) for its second quarter, ended June 30, 2021. While its net income increased 1,721.9% year-over-year to €7.74 billion ($9.09 billion), its EPS came in at €1.37, up 1,857.1% year-over-year. Also, its OIBDA was €13.47 billion ($15.82 billion), up 3.3% year-over-year.
The stock’s forward EV/S and P/S of 1.74x and 0.59x, respectively, are lower than the 2.58x and 1.69x industry averages.
Analysts expect TEF’s EPS to increase 6% year-over-year to $0.33 in its fiscal year 2022. In addition, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 26.5% in price to close yesterday’s trading session at $4.87.
TEF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
TEF has an A grade for Value, and a B grade for Growth and Stability. Within the A-rated Telecom-Foreign industry, it is ranked #10 out of 49 stocks. Click here to see the additional POWR Ratings for Sentiment, Quality, and Momentum for TEF.
CNH Industrial N.V. (CNHI)
CNHI in London designs, produces, markets, sells and finances agricultural and construction equipment, commercial vehicles, and specialty vehicles internationally. The company operates through five segments: Agriculture; Construction; Commercial and Specialty Vehicles; Powertrain; and Financial.
On August 31, 2021, CNHI launched MYshuttle!. Daniela Ropolo, Head of Sustainable Development Initiatives for CNH Industrial, said: “CNH Industrial has always been one of the international players in the world of transport and MYshuttle! offers a tangible interpretation of the ‘Smart Mobility’ concept and the link with sustainable mobility, technology, and innovation, all factors that are integrated into the mobility of tomorrow.”
For the second quarter ended June 30, 2021, CNHI’s total revenues increased 59.8% year-over-year to $8.91 billion. The company’s net income increased 97.1% year-over-year to $690 million. Also, its EPS was $0.51, up 96.2% year-over-year.
In terms of forward non-GAAP P/E, CNHI’s 14.05x is 31.9% lower than the 20.62x industry average. In addition, the stock’s 1.19x and 0.66x respective forward EV/S and P/Sare also lower than the 1.87x and 1.52x industry averages.
CNHI’s revenue is expected to be $31.7 billion in the current year, representing a 21.8% year-over-year rise. In addition, the company’s EPS is expected to increase 332.1% year-over-year to $1.21 in the current year. Over the past year, the stock has gained 99.8% in price to close yesterday’s trading session at $16.16.
It’s no surprise that CNHI has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Value, and a B grade for Growth and Sentiment.
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ERIC shares were trading at $11.64 per share on Wednesday afternoon, down $0.06 (-0.51%). Year-to-date, ERIC has declined -2.03%, versus a 20.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
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