Growth stocks  have outperformed value stocks significantly over the past decade. And thanks to the effects of the coronavirus pandemic, 2020 was a great year for growth stocks. Conversely, value stocks have struggled to bounce back since the March market slump. The truth is, many investors are still chasing high-growth stocks despite their  trading at lofty valuations. However, several analysts expect  an economic recovery to drive a big shift in investment activity from expensive growth stocks to quality turnaround candidates. Rising consumer spending and mass vaccinations should help some pandemic-battered companies recover their strength.

Recent outperformance by value stocks is evident in the iShares Russell 1000 Value ETF’s (IWD) 14.6% returns over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 13.6% returns. Analysts expect value stocks to continue outperforming the market as an economic recovery takes hold this year.

We note that Intel Corporation (INTC), Oracle Corporation (ORCL), Sanofi (SNY) and GlaxoSmithKline PLC (GSK) are currently trading at discounts to their peers and we think are poised to deliver solid returns based on their earnings growth potential.

Intel Corporation (INTC)

INTC designs integrated digital technology platforms for smart and connected devices worldwide. By embedding intelligence in the cloud, network, and edge, INTC seeks to unleash the potential of data to transform business. It operates through PC Client Group, Data Center Group, Internet of Things Group, Mobile and Communications Group, Software and Services, and All Other segments.

In terms of forward p/e, INTC is currently trading at 12.18x, 55% below the industry average of 27.16x. In terms of trailing-12-month p/s, the stock is currently trading at 3.13x, which is significantly lower than the industry average of 4.14x.

INTC highlighted how it is driving technology leadership with the introduction of more than 50 processors, under four processor families, which has contributed to more than 500 new designs for laptops and desktops coming to market in 2021. The company recently launched its 11th Gen Intel Core vPro platform and Intel Evo vPro platform. It delivers the most comprehensive hardware-based security. INTC has also introduced its N-series 10-nanometer Intel Pentium Silver and Intel Celeron processors that offer a balance of performance. And its  new line of 11th Gen Intel Core H-series mobile processors deliver an industry-leading balance of mobility and enthusiast-level gaming. INTC’s full-year revenues surged 8% year-over-year to a record $77.9 billion in its fiscal year ended December 26, 2020; its data-centric revenues increased 8%, while PC-centric revenues improved 9% year-over-year. The company also generated a record $35.4 billion in cash from operations during the year. Its adjusted EPS came in at $5.3, rising 9% year-over-year.

INTC made  several leadership changes last month, including appointing Sunil Shenoy as Vice President of its Design Engineering Group and Pat Gelsinger as the CEO. These executive changes may mark a major turning point for INTC as it  seeks to drive its y’s growth more aggressively and boost its position in the chip making foundry by leveraging their decades of experience.

INTC has retreated  nearly 11% over the past year and has also lost market share. However, the stock is up over 15% in the past month. The Street expects INTC to revamp its business, improve process technology, and reclaim  customers this year when artificial intelligence (AI) and 5G innovation picks up pace. Analysts also  expect INTC’s EPS to grow at a rate 5.4% per annum over the next five years.

INTC’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

The stock has an overall rating of A, which equates to Strong Buy in our proprietary rating system. INTC has a grade of A for Value, Sentiment and Quality. In the 96-stock Semiconductor & Wireless Chip industry, it is ranked #9.

In total, we rate INTC on eight different levels. Beyond what we stated above, we also have given INTC grades for Growth, Momentum, and Stability. Get all INTC’s ratings here.

Oracle Corporation (ORCL)

ORCL develops, hosts, and supports database and middleware software, application software, cloud infrastructure, hardware systems, and related services worldwide. It operates via four segments – cloud services and license support, cloud license and on-premises license, hardware, and services. The company  currently has 7,300 Fusion enterprise resource planning (ERP) customers and more than 23,000 NetSuite ERP customers in the Oracle Cloud.

ORCL has gained more 17% over the past year. However, its forward p/e ratio currently stands at 14.30, which significantly lower than the industry average of 27.16. In terms of trailing-12-month price-to-cash flow, the stock is currently trading at 13.15x, 39.5% lower than the industry average of 21.73x.

To help businesses prioritize workforce safety and prepare for the post-COVID workplace, ORCL has recently updated the Employee Care Package within its Oracle Fusion Cloud Human Capital Management (HCM). The latest updates to the package , which was launched in June 2020 to help HR leaders navigate new workforce demands, include new COVID-19 testing and vaccine tracking capabilities for HR teams and automated guidance for employees as they return to the workplace.

ORCL has opened 13 additional Cloud datacenter regions in 2020 and currently operates 29 regions globally – the fastest expansion by any major cloud provider. The company is constantly improving new logistics capabilities within its Oracle Fusion Cloud Supply Chain & Manufacturing (SCM) to help organizations increase the efficiency of their global supply chains.

ORCL has increased its already aggressive expansion plan, and now expects to have 38 Cloud regions live by mid-2021, with the recent opening of three new commercial cloud regions.

In its fiscal second quarter ended November 30, 2020, ORCL’s revenues were up 2% year-over-year to $9.8 billion. Its cloud services and license support contributed 72% to its  top line; the segment’s revenues increased 4% to $7.1 billion. The company’s highly profitable multibillion-dollar Fusion and NetSuite Cloud ERP applications businesses grew their revenues 33% and 21%, respectively, during the quarter. And its non-GAAP EPS came in at $1.06, rising 19% compared to the year-ago quarter. Analysts further expect ORCL’s current year revenue and EPS to grow 2.6% and 13.2%, respectively.

ORCL’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to a Strong Buy. ORCL has a grade of B for Value, Momentum and Quality. It is ranked #5 of 108 stocks in the Software – Application industry.

In addition to the POWR Ratings grades I have just highlighted, you can see the ORCL’s ratings for Growth, Stability, and Sentiment here.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

Sanofi (SNY)

SNY is a Paris-based biopharmaceutical company that is focused on  preventing rare diseases and long-term chronic conditions with vaccines and providing innovative treatments to fight pain and ease suffering. SNY operates in  some 170 countries with 73 manufacturing sites in nearly 32 countries. It operates primarily in three segments – pharmaceuticals, vaccines, and animal health.

SNY’s forward p/e ratio currently stands at 10.12, which is significantly  lower than the industry average of 27.49. In terms of trailing-12-month p/s, the stock is currently trading at 2.69x, 67.4% lower than the industry average of 8.23x.

SNY is developing a potential COVID-19 vaccine in partnership with Translate Bio, and is planning to launch a phase 2b study this month, with support from the Biomedical Advanced Research and Development Authority (BARDA) in the U.S. SNY  recently entered into an agreement with BioNTech (BNTX) under which it will support manufacturing and supply of the latter’s COVID-19 vaccine,  which is being co-developed with Pfizer (PFE). The company will provide BNT access to its established infrastructure and expertise to produce more than 125 million doses of COVID-19 vaccine in Europe.

SNY has also recently launched Euroapi, a new company dedicated to the development, production and marketing of active pharmaceutical ingredients (API). It seeks to be the largest API player in the European Union, with approximately €1 billion in expected sales by 2022.

SNY is scheduled to release its fourth quarter and full-year 2020 results tomorrow. In the third quarter, ended September 30, 2020, the company delivered revenues of €9.5 billion, which represents a  5.7% year-over-year increase.  Specialty care sales grew 23.8%, driven by strong Dupixent performance and growth in other franchises. Its vaccine sales were up 13.6%, driven by record flu vaccine sales. SNY reported net income of €2.3 billion, rising 2.3% from the prior-year value at CER. Wall Street analysts further expect SNY’s EPS to grow at the rate 7.5% per annum for the next five year.

In January, SNY acquired Kymab, a clinical-stage biopharmaceutical company that is developing fully human monoclonal antibodies with a focus on immune-mediated diseases and immuno-oncology therapeutics. Last month SNY gained full global rights to KY1005, a fully human monoclonal antibody that has a novel mechanism of action. SNY has more than 91 new projects in development with nearly 39 projects in Phase 3 trials or already submitted for regulatory approval. It is no surprise that SNY has an overall rating of B, which equates to Buy in our POWR Ratings system. SNY has a grade of A for Value and B for Stability. In the 239-stock Medical – Pharmaceuticals industry, it is currently ranked #19.

Click here to see the additional POWR Ratings for SNY (Growth, Momentum, Sentiment, and Quality).

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

GlaxoSmithKline PLC (GSK)

GSK engages in the creation, discovery, development, manufacture, and marketing of pharmaceutical products, vaccines, over-the-counter medicines, and health-related consumer products in the United Kingdom, the United States, and internationally. It operates through four segments – pharmaceuticals, pharmaceuticals R&D, vaccines, and consumer healthcare.

GSK’s forward p/e ratio currently stands at 13.93, which is 49.3% lower than the industry average of 27.49. In terms of trailing-12-month p/s, the stock is currently trading at 2.10x, which is significantly lower than the industry average of 8.23x.

GSK has forged  several vaccine collaborations, including a new strategic partnership with CureVac NV (CVAC) to develop a next-generation messenger-RNA vaccine for COVID-19 and support the manufacture of 100 million doses this year. In December, GSK commenced a partnership with SNY on its protein-based coronavirus vaccine. Moreover, GSK, along with PATH and Bharat Biotech (BBIL), recently signed a product transfer agreement for a malaria vaccine. The agreement includes the transfer of manufacturing of the antigen part of the vaccine and the grant of a license on all rights pertaining to the malaria vaccine to BBIL.

GSK released its full-year 2020 results yesterday, which failed to impress the Street. Its top line increased 1% to £34 billion, driven by robust growth in HIV, respiratory, oncology and consumer healthcare, partially offset by dip in pharmaceuticals and lower vaccine revenue. GSK also delivered an adjusted group operating margin of 26.1%. Its profit before tax came in 12% higher at £6.9 billion.

GSK currently has 59 projects in its product pipeline with 18 vaccines/compounds in Phase 3 trials. According to  CEO Emma Walmsley, “We are building a high value biopharma pipeline, have substantially integrated our Consumer JV and have delivered all our first-year targets for our two-year separation program. This means we are in a strong position to launch new competitive, standalone biopharma and consumer healthcare companies in 2022.” In line with its progress, analysts expect the company’s EPS to grow at the rate 3.3% per annum for the next five year.

GSK’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which equates to Buy. GSK has a grade of A for Value and B for Stability. It is ranked #24 of #239 stocks in the Medical – Pharmaceuticals industry.

In addition to the POWR Ratings grades I have just highlighted, you can see the GSK’s ratings for Growth, Momentum, Sentiment, and Quality here.

The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

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INTC shares were trading at $58.48 per share on Thursday morning, up $0.80 (+1.39%). Year-to-date, INTC has gained 17.38%, versus a 2.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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