While growth stocks handily dominated the market last year, value stocks came into focus in the first half of this year. Investors’ interest in value stocks is evident in the SPDR Portfolio S&P 500 Value ETF’s (SPYV) and Vanguard Value Index Fund ETF’s (VTV) 15.8% and 16.3% returns, respectively, so far this year.
With jobless claims falling to a new pandemic low, the U.S. economy is on a solid path to recovery. And this has been driving major stock market indexes to new highs, making it difficult to find true value names in the market. That’s because the prices of most stocks have by now far outstripped their intrinsic value. However, there are still some quality stocks in the market that are trading at lower valuations.
Molina Healthcare, Inc. (MOH), AGCO Corporation (AGCO), and Lumber Liquidators Holdings, Inc. (LL) are examples. They possess solid growth prospects, but their stocks are trading at discounts to their peers. So, we think there could be upside left in these stocks.
Molina Healthcare, Inc. (MOH)
MOH provides managed health care services to low-income families and individuals under Medicaid and Medicare programs and through state insurance marketplaces. The company operates through two segments: Health Plans and Other. It offers its health care services through contracts with a network of providers that include independent physicians and physician groups, hospitals, ancillary providers, and pharmacies. MOH is based in Long Beach, Calif. The company is expected to announce its second quarter (ended June 30, 2021) financial results on July 28. Its total revenue surged 43.4% year-over-year to $6.52 billion for the first quarter, ended March 31, 2021. Its net income came in at $228 million, which represents a 28.1% year-over-year rise. And its adjusted EPS increased 47% year-over-year to $4.44.
In terms of forward EV/S, MOH’s 0.49x is 93.2% lower than the 7.23% industry average. Its 19.25x forward non-GAAP P/E is 21.1% lower than the 24.41x industry average.
Analysts expect MOH’s EPS to increase 25.1% year-over-year to $13.35 in its fiscal year 2021. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Its revenue is expected to be $6.37 billion for the about-to-be-reported quarter, ended June 30, 2021, which represents a 35% year-over-year rise.
In April, MOH and Cigna Corporation (CI) agreed that MOH would acquire CI’s Texas Medicaid and Medicare-Medicaid Plan (MMP) contracts and certain operating assets. The transaction is expected to be immediately accretive to MOH’s adjusted EPS. The stock has rallied 43% over the past year to close yesterday’s trading session at $256.25.
MOH’s POWR Ratings reflect this promising outlook. The stock 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.
It also has an A grade for Value, and a B grade for Quality. In addition to these ratings, one can see MOH’s ratings for Stability, Sentiment, Momentum, and Growth here.
MOH is ranked #2 of 12 stocks in the B-rated Medical-Health Insurance industry.
AGCO Corporation (AGCO)
AGCO is a manufacturer and distributor of agricultural equipment and related replacement parts. Its offerings include tractors, self-propelled sprayers, hay tools, forage equipment, seeding and tillage equipment. The Duluth, Ga.-based company markets its products under several brands, such as Challenger, Fendt, GSI and Massey Ferguson.
For its fiscal first quarter ended March 31, 2021, AGCO’s net sales increased 23.4% year-over-year to $2.38 billion. The company’s net income increased 133.1% from the same period last year to $150.80 million. And its adjusted EPS came in at $2.00 for the quarter, up 132.6% year-over-year.
In terms of forward EV/S, AGCO’s 1.02x is 48% lower than the 1.96x industry average. Its 15.28x forward non-GAAP P/E is 28.1% lower than the 21.25x industry average.
AGCO’s EPS and revenue are expected to increase 100% and 36.3%, respectively, year-over-year to $2.22 and $2.74 billion for the quarter ended June 30, 2021. It surpassed consensus EPS estimates in each of the trailing four quarters.
On May 28, 2021, AGCO entered a proof of concept (PoC) collaboration agreement with Robert Bosch GmbH, BASF Digital Farming and Raven Industries Inc. (RAVN) to evaluate targeted spraying technology. The companies’ combined technological prowess is expected to help farmers drive greater efficiency in their operations, which could in turn foster increasing demand for this solution. The stock has gained 144.9% over the past year to close yesterday’s trading session at $132.14.
AGCO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
The stock also has an A grade for Growth and Value, and a B grade for Sentiment. Click here to access AGCO’s ratings for Stability, Momentum, and Quality as well.
AGCO is ranked #1 of 30 stocks in the Agriculture industry.
Lumber Liquidators Holdings, Inc. (LL)
LL in Richmond, Va., is a multi-channel specialty retailer of hardwood flooring and hardwood flooring enhancements and accessories. The company’s product categories include solid and engineered hardwood, laminate, bamboo, and vinyl plank. It offers its products through its website, catalogs, and call center, and provides in-home delivery and installation services.
LL’s net sales were $283.45 million for fiscal first quarter, ended March 31, 2021, which represents a 6% rise from the prior-year period. Its gross profit for the quarter came in at $115.59 million, up 10.1% year-over-year. Its cash flow from operating activities was $44.50 million, which represents a 23.6% year-over-year increase.
In terms of forward EV/S, LL’s 0.53x is 65.8% lower than the 1.55x industry average. And its 15.80x forward non-GAAP P/E is 8.1% lower than the 17.20x industry average.
For the quarter ended June 30, 2021, analysts expect LL’s EPS and revenue to increase 140% and 35.7%, respectively, year-over-year to $0.24 and $299.57 million. Furthermore, it surpassed the consensus EPS estimates in each of the trailing four quarters.
In late June, LL opened new stores in Beckley, West Virginia, and Hattiesburg, Mississippi, bringing its nationwide store count to 416. The company’s CEO Charles Tyson said, “We are excited to expand our national store presence by adding locations in two vibrant communities where we can deliver a wide selection of trend-right quality flooring to homeowners and pros looking for beautiful styles that can enhance any space or room.” The stock has gained 53.7% over the past year to close yesterday’s trading session at $21.37.
It’s no surprise that LL has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Value and Momentum, and a B grade for Quality and Growth. Click here to see the additional POWR Ratings for LL (Stability and Sentiment).
LL is ranked #11 of 65 stocks in the A-rated Home Improvement & Goods industry.
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MOH shares were trading at $256.20 per share on Friday afternoon, up $0.15 (+0.06%). Year-to-date, MOH has gained 20.46%, versus a 16.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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