3 Undervalued Stocks To Buy Before 2025: A Conservative Perspective
As the holiday season approaches, many begin to ponder their shopping lists. While toys, gadgets, and gift cards may occupy the thoughts of many, savvy investors should be gearing up to add undervalued stocks to their portfolios. The fourth quarter has traditionally been one of the strongest periods for the stock market, making it an opportune moment to capitalize on promising investments. This article provides a look at three undervalued stocks poised for growth, all featuring strong fundamentals that may not yet be reflected in their share prices.
Criteria for Selecting Undervalued Stocks
In a recent examination by GOBankingRates, experts identified companies with solid fundamentals that are undervalued in the current market. The evaluation employed criteria such as low price-to-earnings (P/E) ratios and significant free cash flow relative to stock price. This approach seeks to uncover hidden gems that could offer substantial returns as their true value is recognized by the market.
1. Federated Hermes (FHI)
Federated Hermes (FHI) has recently received an upgrade to a buy rating from Zacks, reflecting renewed investor interest. Despite its recent price increase, CEO Ulrich Ebensperger believes FHI remains a highly attractive investment opportunity. Priced at only 9 times projected 2025 earnings, FHI stands out as a bargain in today’s market. The company boasts a remarkable 15% return on assets, significantly outperforming competitors like BlackRock and Blackstone in profitability.
Furthermore, FHI has a proven commitment to enhancing shareholder value through consistent share buybacks and currently offers a generous dividend yield of 5.95%. With a price-to-earnings growth (PEG) ratio below one, and a price-to-book (P/B) value of 3, FHI presents a compelling case for investors seeking undervalued opportunities.
2. United Therapeutics (UTHR)
Another stock to consider is United Therapeutics (UTHR). The pharmaceutical company recently reported a remarkable $715 million in revenue for the second quarter of 2024, representing a 20% year-over-year increase. Such impressive earnings have driven UTHR shares to a near 52-week high, yet analysts believe there is still value to be had. Ebensperger notes that UTHR has a forward P/E ratio of just 13.2, which is modest given its robust track record of revenue and earnings growth.
Located at the forefront of the market for pulmonary arterial hypertension (PAH) treatment, UTHR is well positioned to benefit from a projected annual market growth rate of 5.5%. The company shows excellent financial health, with its available cash exceeding its liabilities, adding further appeal for conservative investors.
3. PayPal (PYPL)
Despite a significant recovery in stock price throughout 2024, PayPal (PYPL) has faced challenges in regaining its pre-pandemic prominence. Following its recent earnings release, however, there is optimism among analysts that the company may be on the verge of a turnaround. PayPal’s year-over-year (YoY) net revenue has climbed by 8%, while its GAAP operating income has increased by 17%.
With P/E ratios and price-to-sales metrics approaching all-time lows, Ebensperger sees promise for PYPL. The company’s proactive cost-cutting measures, including a 9% reduction in its global workforce, have improved operating margins by 231 basis points to reach 18.5%. This strategic restructuring is evidence of the management’s commitment to enhancing shareholder value, making PYPL an interesting investment as it seeks to reclaim its status as a market leader.
Conclusion: Timing is Everything
As we navigate into the final quarter of 2024, investors would do well to pay attention to these three undervalued stocks. With strong fundamentals and growth potential evident in Federated Hermes, United Therapeutics, and PayPal, these companies represent promising opportunities ahead of 2025. In a market often swayed by emotion, the disciplined, results-driven investor will find that the best stocks are often the ones most overlooked. Dive into the details, do your due diligence, and make informed decisions as we move forward into the new year.
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