5 Safe, Undervalued and Profitable Stocks To Consider
Robert is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Below I have analyzed five stocks that are trading at a discount to their peers. These stocks have a low beta (lower than 1), higher margins than the industry and strong fundamentals in place to outperform their competitors.
Gilead Sciences, Inc. (NASDAQ: GILD) is a biopharmaceutical company. Shares of the company are currently trading near $47 per share. Over the last 52 weeks, its shares have traded between $34.45 and $47.55 per share. The company has a beta of 0.46, indicating that its stock is not volatile in nature. Gilead Sciences reported a return-on-equity of 45.5% and a profit margin of 33.8%.
Gilead Sciences currently has higher margins than its competitor GlaxoSmithKline plc (NYSE: GSK). The company’s operating margin of 48% is significantly greater than other industry players like Bristol Myers (NYSE: BMY) at 33% and Glaxo at 37%. Also, it has a significantly low price-to-earnings ratio of 13.8 times versus the 44.4 times reported by GlaxoSmithKline. Gilead Sciences’ five year expected price-to-earnings-to-growth ratio of 0.72 times is lower than the 0.93 times reported by GlaxoSmithKline, indicating that the company’s future earnings can be bought at a lower price today. The company’s current valuations show that it is undervalued as compared to its competitors. With 15% year-to-date gains in the biotech sector, Gilead Sciences is seeing major tailwinds to its growth.
Home Depot (NYSE: HD) is a home improvement retailer. Home Depot’s shares are currently trading near yearly highs at around $45 per share and its shares have traded between $28.13 and $45.50 per share over the last 52 weeks. The company has a beta of 0.88, indicating that its stock is not volatile in nature. Also, Home Depot reported a dividend yield of 2.6%.
The company generated an operating margin of 9.2% versus the 7.5% reported by its competitor, Lowe’s Companies (NYSE: LOW). Home Depot also has higher earnings per share of $2.32 as compared to Lowe’s Companies’ $1.37. Home Depot reported a profit margin of 5.3% while Lowe’s Companies reported a profit margin of 3.6%. Shares of the company are looking to rise after Home Depot’s recent acquisition of Redbeacon. Also, the company’s cheaper valuations and consistent profitability make it a worthy investment stock.
Eli Lilly and Company (NYSE: LLY) is a pharmaceutical company. Shares of the company are currently trading near $40 per share. Over the last 52 weeks, its shares have traded within a narrow range of $33.46 and $42.03 per share. The company has a low beta of 0.67, indicating that its stock is not volatile in nature. Eli Lilly reported a dividend yield of 4.9%. The company generated a return-on-equity of 34% and a profit margin of 19%.
Pfizer (NYSE: PFE), a competitor of Eli Lilly, reported a gross margin of 77.8% and an operating margin of 27.8%. Eli Lilly reported a higher gross margin of 79% and an operating margin of 27%. Eli Lilly also has higher earnings per share of $4.18 versus $1.44 reported by Pfizer. Eli Lilly’s price-to-equity ratio of 9.5 times is lower than the industry average at 14 times, indicating that its shares can be bought much cheaper today. The company generated a return of more than 14% and its growth and performance are likely to remain steadier than its competitors, coupled with strong dividends.
Windstream Corporation (NASDAQ: WIN) is a communication and technology solutions provider and is based in the U.S. Shares of the company are currently trading near $12 per share. Over the last 52 weeks, its shares have traded within a very narrow range of $10.76 and $13.57 per share. The company has a beta of 0.71, indicating low stock volatility and it has a relatively high dividend yield of 8.1%.
Sprint Nextel Corporation (NYSE: S) is a competitor of Windstream and is generating a gross margin of 45% with an operating margin of 1.7%. Windstream, on the other hand, reported significantly higher margins of 61.7% and 28.8% respectively. Windstream also had earnings per share of $0.51 while Sprint had negative earnings per share of $0.84. Windstream’s return-on-equity was 36% versus Sprint’s negative 17.5%. In comparison with other high-dividend yield companies, Windstream was one of few with positive returns at 0.66%. Its dividend policy is also quite strong, with no change in the quarterly dividends since 2006, despite adverse economic conditions.
Exxon Mobil Corporation (NYSE: XOM) is a producer and explorer of natural gas, crude oil, and petroleum products. Shares of the company are currently trading near yearly highs of $88 per share and have traded between $67.03 and $88.23 per share over the last 52 weeks. The company has a relatively low beta of 0.62, indicating little stock volatility and it has a dividend yield of 2.1%. Exxon Mobile generated a return-on-equity of 26.8% and a profit margin of 9.8%.
British Petroleum plc (NYSE: BP) is a competitor of Exxon Mobile that is generating a gross margin of 15% and an operating margin of 7.8%. Exxon Mobil reported higher margins of 30.7% and 12.9% respectively. Exxon Mobil’s price-to-earnings-to-growth ratio of 1.2 times is lower than that of British Petroleum at 1.9 times, indicating that its future earnings growth can be purchased at a relatively lower price. Exxon Mobil’s price-to-sales ratio of 0.99 times is also lower than the industry average of 1.42 times. With its positive valuations, Exxon Mobil is looking to be an inflation-proof stock with high dividends. With Goldman Sachs indicating a possible spike in oil prices, Exxon Mobil’s shares are expected to rise in the near future.
Motley Fool newsletter services recommend Gilead Sciences and The Home Depot. The Motley Fool owns shares of Gilead Sciences. Vatalyst has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.