Following the Fed’s 75-bps rate hike in September 2022, Atlanta Fed President Raphael Bostic expects the U.S. central bank to hike rates by another 75 bps in November and by 50 bps in December. Amid consecutive rate hikes and rising recession odds, Morgan Stanley has estimated a 3% year-over-year drop in S&P 500 for 2023.

However, Deputy U.S. Treasury Secretary Wally Adeyemo believes that consumer and corporate balance sheets are in good shape. According to him, there are chances of avoiding a recession and achieving a ‘soft-landing’ despite the aggressive rate hikes.

Considering the uncertain market conditions, experts recommend buying undervalued stocks with solid rebound potential. Thomas Muñoz, the financial life advisor at Telemus, said, “Now is the time to buy stocks at more attractive valuations in comparison to where they were a year ago.”

Quality stocks Volkswagen AG (VWAGY), CSX Corporation (CSX), and AstroNova, Inc. (ALOT) look significantly undervalued at their current price levels. So, these stocks could be ideal additions to your portfolio.

Volkswagen AG (VWAGY)

VWAGY manufactures and sells automobiles primarily in Europe, North America, South America, and the Asia-Pacific. The company operates in four segments: Passenger Cars and Light Commercial Vehicles; Commercial Vehicles; Power Engineering; and Financial Services.

VWAGY’s sales revenue came in at €69.54 billion ($69.43 billion) for the 2022 second quarter, up 3.3% year-over-year. Moreover, the company’s cash flow from investing activities came in at €7 billion ($6.99 billion), up 48.6% year-over-year.

VWAGY’s forward EV/Sales of 0.89x is 12.5% lower than the industry average of 1.02x. Its forward Price/Sales of 0.23x is 69.2% lower than the industry average of 0.76x.

Analysts expect VWAGY’s revenue to increase 7.8% year-over-year to $300.64 billion in 2023. Its EPS is expected to increase by 5.1% per annum for the next five years. Over the past three months, the stock has lost 10.8%.

VWAGY’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating is a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

VWAGY has an A grade for Value and a B grade for Stability and Quality. Within the Auto & Vehicle Manufacturers industry, it is ranked #3 out of 64 stocks. Beyond what is stated above, we’ve also rated VWAGY for Growth, Momentum, and Sentiment. Get all the VWAGY ratings here.

CSX Corporation (CSX)

Premier transportation company CSX and its subsidiaries provide rail-based freight transportation services. CSX links more than 240 short-line railroads and more than 70 ocean, river, and lake ports with population centers and farming towns.

On July 20, 2022, James M. Foote, President, and CEO, said, “Our efforts remain focused on adding the resources needed to deliver improvements in our network performance, lift customer satisfaction and develop new rail service solutions to drive meaningful growth over the long term.”

For the second quarter that ended June 30, 2022, CSX’s revenue came in at $3.81 billion, up 27.6% year-over-year. Its net earnings came in at $1.18 billion, up marginally year-over-year, while its EPS came in at $0.54, up 3.8% year-over-year.

In terms of forward EV/EBIT, CSX’s 12.47x is 7.7% lower than the industry average of 13.51x. Its forward Price/Cash Flow of 10.39x is 14.7% lower than the industry average of 12.19x.  

CSX’s revenue is expected to come in at $14.74 billion in 2022, representing a 17.7% year-over-year rise. The company’s EPS is expected to increase by 20.6% year-over-year to $1.87 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past three months, the stock has lost 8.3%.

CSX has an overall B grade equating to a Buy in our POWR Ratings system. It has a B grade for Momentum, Sentiment, and Quality. It is ranked #5 out of 15 stocks in the B-rated Railroads industry. Click here for additional CSX ratings (Growth, Value, and Stability).

AstroNova, Inc. (ALOT)

ALOT designs, develops, manufactures, and distributes specialty printers, and data acquisition and analysis systems in the United States, Europe, Asia, Canada, Central, and South America, and internationally. The company operates in two segments, Product Identification (PI) and Test & Measurement (T&M).

On August 9, 2022, ALOT announced the acquisition of Astro Machine for an aggregate purchase price of $17.10 million in cash. Under the agreement, ALOT will gain Astro Machine’s 34,000-square-foot engineering and manufacturing plant in Illinois. ALOT expects this acquisition to fortify its PI segment in the near term.

ALOT’s revenue came in at $32.26 million for the second quarter ended July 30, 2022, up 8.1% year-over-year. Its non-GAAP gross profit came in at $11.38 million, up 2.8% year-over-year. Moreover, its total current assets came in at $67.66 million for the period ended July 30, 2022, compared to $63.78 million for the period ended January 31, 2022.

ALOT’s trailing-12-month EV/Sales of 0.80x is 69.1% lower than the industry average of 2.59x. Its trailing-12-month Price/Sales of 0.71x is 72.1% lower than the industry average of 2.55x.

Street expects ALOT’s revenue to increase 6.4% year-over-year to $125.03 million in 2023. ALOT has lost 2.3% over the past three months.

It’s no surprise that ALOT has an overall A rating, equating to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Value and Sentiment and a B for Momentum and Quality.

ALOT is ranked first among 49 stocks in the Technology – Hardware industry. Click here for the additional POWR Ratings for ALOT (Growth and Stability).

VWAGY shares were trading at $16.45 per share on Monday morning, up $0.21 (+1.26%). Year-to-date, VWAGY has declined -42.16%, versus a -22.43% 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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