Value stocks were in focus earlier this year as investors rotated away from expensive growth stocks. While the fast-paced economic recovery and the low interest rate environment are helping growth stocks attract investors’ attention again, quality value stocks may have more room to run in the coming months. Investors’ interest in value stocks is evidenced by the SPDR Portfolio S&P 500 Value ETF’s (SPYV) and the Vanguard Value Index Fund ETF Shares’ (VTV) 14.9% and 15.5% respective year-to-date returns.
Even though the stock market has been volatile amid high inflation concerns, Wall Street closed the first half of 2021 at record highs. This has led to most stocks, including some fundamentally weak ones, to trade at lofty valuations. Some quality stocks are still trading at reasonable valuations, however.
We think FedEx Corporation (FDX), Dell Technologies Inc. (DELL), General Dynamics Corporation (GD), and Cognizant Technology Solutions Corporation (CTSH) hold immense growth potential, but their shares are currently trading at discounts to their peers. Our proprietary POWR Ratings system has rated these stocks Buy. So, it could be wise to bet on them now.
FedEx Corporation (FDX)
One of the top delivery services companies, FDX provides transportation, e-commerce, and business services worldwide. The company’s segments include FedEx Express, TNT Express, FedEx Ground, FedEx Freight and FedEx Services. FedEx is based in Memphis, Tenn.
In mid-June, FDX and Nuro announced a multi-year, multi-phase agreement to test Nuro’s next-generation autonomous delivery vehicle within the company’s operations. Rebecca Yeung, FDX’s vice president, advanced technology and innovation said, “We are excited to collaborate with an industry leader like Nuro as we continue to explore the use of autonomous technologies within our operations.”
FDX’s revenue increased 29.9% year-over-year to $22.60 billion for the first quarter ended May 31, 2021. Its non-GAAP operating income grew 117.2% year-over-year to $1.97 billion, while its non-GAAP net income increased 105.1% year-over-year to $1.36 billion. Also, its non-GAAP EPS came in at $5.01, up 98% year-over-year.
In terms of forward P/CF, FDX’s 7.77x is 50.3% lower than the 15.65x industry average. In terms of forward P/S, the stock’s 0.86x is 45.5% lower than the 1.58x industry average.
Analysts expect FDX’s EPS and revenue to increase 17% and 8.4%, respectively, year-over-year to $21.26 and $91.02 billion in 2022. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 88.5% over the past year to close yesterday’s trading session at $294.61.
It’s no surprise that FDX has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Value, Quality, and Sentiment. Click here to see FDX’s ratings for Growth, Stability, and Momentum as well.
FDX is ranked #4 of 16 stocks in the A-rated Air Freight & Shipping Services industry.
Dell Technologies Inc. (DELL)
As one of the world’s leading technology companies, DELL designs, develops, manufactures, markets, sells, and supports information technology solutions, products, and services worldwide. It operates through two segments: Client Solutions and Enterprise Solutions Group (ESG). The company announced the planned spin-off of its 81% equity ownership interest in VMware (VMW) on April 14, 2021. Dell is based in Round Rock, Tex.
In May, DELL announced an expanded collaboration with global digital infrastructure company Equinix, Inc. (EQIX) to broaden the availability of its APEX via EQIX’s International Business Exchange data centers. This move is expected to help it deliver a secure, on-demand hybrid cloud solution.
The company’s non-GAAP net revenue increased 12% year-over-year to $24.50 billion for its fiscal first quarter, ended April 30, 2021. Its non-GAAP operating income grew 26% year-over-year to $2.71 billion. Its non-GAAP net income increased 59% year-over-year to $1.82 billion. And its non-GAAP EPS increased 59% from the same period last year to $2.13.
In terms of forward P/S, DELL’s 0.75x is 81.5% lower than the 4.06x industry average Its 1.14x forward EV/S is 73.2% lower than the 4.26x industry average.
For 2022, analysts expect DELL’s EPS and revenue to increase 7.5% year-over-year to $8.60 and $101.44 billion, respectively. It surpassed the Street’s EPS estimates in each of the trailing four quarters. The stock has gained nearly 82% over the past year to close yesterday’s trading session at $98.37.
DELL’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
The stock has a B grade for Value and Sentiment. Within the B-rated Technology – Hardware industry, DELL is ranked #5 of 45 stocks.
To see DELL’s ratings for Growth, Momentum, Stability, and Quality, click here.
General Dynamics Corporation (GD)
GD operates as an aerospace and defense company worldwide. The Falls Church, Va. company operates through four segments: Aerospace, Marine Systems, Combat Systems, and Technologies. Its Marine Systems segment designs and builds nuclear-powered submarines, surface combatants, and auxiliary ships for the United States’ Navy and Jones Act ships for commercial customers.
Gulfstream Aerospace Corp., a wholly owned subsidiary of GD, announced on March 9, 2021, that it has been awarded $696 million in contracts from the U.S. Air Force Life Cycle Management Center for engineering services support and contractor logistics for C-20 and C-37 aircraft.
GD’s revenue increased 7.3% year-over-year to $9.39 billion for fiscal first quarter ended April 4, 2021. Its total order backlog grew 4.5% year-over-year to $89.6 billion, while its net earnings increased 0.3% year-over-year to $708 million. The company’s EPS increased 2.1% year-over-year to $2.48.
In terms of forward non-GAAP P/E, GD’s 16.70x is 20.1% lower than the 20.90x industry average. The stock’s 13.18x forward P/CF is also lower than the 15.65x industry average.
The company’s EPS and revenue are expected to increase 9.7% and 4.3%, respectively, year-over-year to $12.28 and $40.71 billion in 2022. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 31.3% over the past nine months to close yesterday’s trading session at $186.91.
GD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has a B grade for Stability, Sentiment, and Value.
Cognizant Technology Solutions Corporation (CTSH)
CTSH is a professional services company that provides consulting, technology, and outsourcing services internationally. The company operates through four segments: Financial Services; Healthcare; Products and Resources; and Communications, Media and Technology. Its offerings include customer experience enhancement, robotic process automation, analytics, and artificial intelligence services.
On June 1, 2021, CTSH completed its acquisition of Munich, Germany-based ESG Mobility, a digital automotive engineering R&D provider for connected, autonomous and electric vehicles (EVs). The acquisition could further expand its capabilities in key digital focus areas of cloud, data and artificial intelligence, digital engineering and internet of things.
The company’s revenues increased 4.2% year-over-year to $4.40 billion for the first quarter ended March 31, 2021. Its adjusted income from operations grew 4.5% year-over-year to $669 million, while its net income increased 37.6% year-over-year to $505 million. Also, its adjusted EPS came in at $0.97 compared to $0.96 in the prior-year period.
In terms of forward P/B, CTSH’s 2.77x is 55.4% lower than the 6.22x industry average. The stock’s 2.02x forward EV/S is 52.7% lower than the 4.26x industry average.
CTSH’s EPS and revenue are expected to increase 16.1% and 8.1%, respectively, year-over-year to $3.97 and $18 billion in its fiscal year 2021. It surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has gained 22.2% over the past year to close yesterday’s trading session at $68.73.
CTSH’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system. It also has a B grade for Value, Momentum, and Quality. Click here to see CTSH’s ratings for Stability, Growth, and Sentiment also.
CTSH is ranked #6 of 13 stocks in the A-rated Outsourcing – Tech Services industry.
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FDX shares were trading at $293.01 per share on Wednesday afternoon, down $1.60 (-0.54%). Year-to-date, FDX has gained 13.44%, versus a 16.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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