Growth stocks have outperformed value stocks for a long period, and the difference in the two classes’ returns was eye-catching in 2020. However, the tide is now slowly turning in the favor of value stocks. The momentum around tech stocks has begun to fizzle and investors are instead now seriously considering long-forgotten turnaround sectors. This trend has grown stronger with the roll out of mass COVID-19 vaccination programs and with that heightened optimism about a fast economic recovery. The decline in weekly jobless claims this month to their lowest level since the pandemic is one positive indicator regarding an economic revival.
However, current market volatility is high. The CBOE volatility index rose for three consecutive days after hitting the pre-pandemic level at the start of the week. A jump in 10-year Treasury yields and concerns over the potential for inflation have also pressured growth stocks. Thus, we think it wise for investors to bet on undervalued stocks right now. These stocks tend to perform particularly well in a growing economy.
Takeda Pharmaceutical Company Limited (TAK), Orange (ORAN), Universal Health Services, Inc. (UHS), and Ingredion Incorporated (INGR) are four value stocks that are promising. We believe these stocks have huge upside potential.
Takeda Pharmaceutical Company Limited (TAK)
TAK is a pharmaceutical company that focuses on the core therapeutic areas of oncology, gastrointestinal, and central nervous system diseases.
During the nine-month period ended December 31, 2020, its revenue declined 3.6% year-over-year to JPY 2427 billion. However, the company delivered year-to-date underlying revenue growth of 1.1% during the third quarter, led by strong growth in ENTYVIO, TAKHZYRO, and Immunoglobulin. Its EPS for the quarter rose to JPY 115 from JPY 28 posted in the same period last year.
Analysts expect TAK’s revenue for the quarter ending March 31, 2021 to be $7.2 million, representing a 0.6% year-over-year decline. Its EPS is expected to grow at the rate of 0.6% per annum over the next five years.
TAK has climbed 29.7% over the year to close yesterday’s trading session at $19.23. Over the past six months, the stock has gained 3.8%.
In terms of forward price/sales, TAK is currently trading at 2.01x, 72.4% lower than the industry average 7.29x. The stock’s forward price/earnings of 10.41x is 66.4% lower than the industry average 30.96x.
It’s no surprise that TAK has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
TAK has a Growth and Value rating of A along with a Stability rating of B. In the Biotech industry, it is ranked #11 of 487 stocks.
In addition to the POWR Ratings grades we’ve just highlighted, one can see the TAK’s ratings for Sentiment, Momentum, and Quality.
ORAN offers a diverse range of fixed telephony and mobile telecommunications, data transmission, and other value-added services to consumers, businesses, and other telecommunications operators globally.
ORAN’s revenue for the fourth quarter ended December 31, 2020 rose 0.3% year-over-year to Euro 10.9 billion. A strong trend in wholesale services due to the co-financing of France’s fiber network and convergent services have supported ORAN’s revenue growth. However, its equipment sales declined due to store closures during the coronavirus pandemic. ORAN continued to accelerate the rollout of its broadband networks and at the end of the quarter it had generated Euro 2.5 billion inorganic cash flow from its telecom activities.
ORAN has declined 1% over the last year to end yesterday’s trading session at $12.32. During the past six months, the stock has climbed 18.6%.
In terms of forward price/sales, ORAN is currently trading at 0.64x, which is 65.1% lower than the industry average 1.83x. The stock’s forward price/earnings of 9.06x is also 57.1% lower than the industry average 21.12x.
Due to its bright prospects, ORAN has an overall rating of B, which translates to a Buy. ORAN has a Stability and Value grade of A. In the B-rated, 53-stock Telecom – Foreign industry, it is ranked #16.
Click here to see the additional POWR Ratings for ORAN (Momentum, Growth, and Quality).
Universal Health Services, Inc. (UHS)
UHS owns and operates acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers, and radiation oncology centers.
During the fourth quarter, ended December 31, 2020, UHS’ revenue increased 6.6% year-over-year to $3 billion. Its EPS for the quarter climbed to $3.60 from $2.70 posted in the prior year period. The company received$200 million of grant revenues from various government stimulus programs, including the CARES Act, which had a material impact on its financial results for the quarter.
Analysts expect UHS’s revenue for the quarter ending March 31, 2021 to be $3 billion, representing a 4.8% year-over-year increase. Its EPS is expected to grow at the rate of 6% per annum over the next five years.
UHS ended yesterday’s trading session at $135.50, rallying 54% over the past year. During the past six months, the stock gained 29% higher.
In terms of forward price/sales, UHS is currently trading at 0.95x, 87% lower than the industry average 7.29x. The stock’s forward price/earnings of 12.74x is also 58.8% lower than the industry average 30.96x.
UHS’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. UHS has a Value grade of A, and a Growth and Stability grade of B. In the 10-stock Medical – Hospitals industry, it is ranked #3.
To see additional POWR Ratings for Momentum, Sentiment, and Quality for UHS, Click here.
Ingredion Incorporated (INGR)
INGR manufactures and sells starches and sweeteners, including glucose syrups, high maltose syrups, high fructose corn syrups, caramel colors, dextrose, polyols, maltodextrins, and food-grade and industrial starches.
INGR’s EPS for the fourth quarter, ended December 31, 2020, climbed to $1.70 from $1.61 posted the same period last year. The company’s net sales for the quarter rose 3% year-over-year, driven by growth in its specialty ingredients segment. All regions it serves contributed strongly to INGR’s revenue increase. It also achieved $103 million of run-rate savings and is on track to meet its three-year target of $170 million by the end of 2021.
Analysts expect INGR’s revenue for the quarter ending March 31, 2021 to be $1.6 billion, representing a 2.5% year-over-year rise. Its EPS is expected to grow at the rate of 1.9% per annum over the next five years.
INGR ended yesterday’s trading session at $90.88, climbing 30% over the past year. During the past six months, the stock has climbed 18.9%.
In terms of forward ev/ebitda, INGR is currently trading at 8.40x, which 33% lower than the industry average 12.55x. The stock’s forward price/earnings of 13.95x is also 35.3% lower than the industry average 21.56x.
Due to its bright prospects, INGR has an overall rating of B, which equates to Buy in our POWR Ratings system. INGR has a Value rating of A along with Stability ratings of B. In the B-rated, 81-stock Food Makers industry, it is ranked #16.
Click here to see the additional POWR Ratings for INGR (Sentiment, Growth, Quality, and Momentum).
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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TAK shares were trading at $18.74 per share on Monday morning, down $0.44 (-2.29%). Year-to-date, TAK has gained 2.97%, versus a 5.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Namrata Sen Chanda
Namrata is an accomplished financial journalist, with nearly a decade of experience. She specializes in interpreting news releases and framing investment strategies, and has worked with some of the leading companies in real estate, banking, insurance, mutual funds, financial research, fintech, and investment education. More...
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|ORAN||Get Rating||Get Rating||Get Rating|
|UHS||Get Rating||Get Rating||Get Rating|
|INGR||Get Rating||Get Rating||Get Rating|