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5 Cheap Stocks with Big Long-Term Growth Prospects
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I know that the next few months are full of uncertainty. While things haven’t been as bad as expected, it’s still a fact that second quarter results are shaping up to be pretty weak.
In any normal year, investors would have been more than a little concerned about the 35.5% earnings decline for the S&P 500 on 11.3% lower revenues. Especially when the Zacks Consensus Estimate wouldn’t have been topped by 79.6% of these companies if that estimate hadn’t been drastically cut down in anticipation of dismal results. There would have been a lot more conservatism if these were the results in any normal year.
But therein lies the beauty of the stock market. Because wherever the market is, it’s a starting point for the next phase of investing. So if you’re a new investor, there’s no reason to rue the gains you might have made from using the dip. And if you’re not, it’s time to understand that whatever may have happened in the last few months, whether you ended up gaining or losing from the volatility, now is the time to put it behind you and take stock of what’s going to happen in the future. Because the ability to anticipate the future and invest accordingly is what generates positive returns.
And today, I don’t want to talk about too many numbers. I want to tell you how to search smartly to overcome near-term uncertainty and generate long-term gain. There may be many ways to do this. But the method I’ve chosen for today is fairly simple. You don’t need to understand all the numbers yourself. All you need to do is follow some principles of smart investing using Zacks methodology. So here goes-
First of all, we must recognize that third quarter beats are going to be tougher simply because analysts are adjusting estimates for the new normal as we exit this quarter. As things stand now, analysts expect third quarter revenue and earnings for the S&P 500 to come in a respective 3.7% and 23.8% lower than 2019. So there’s the need for caution.
Also, not many companies are providing numerical guidance although certain trends have emerged that we can use for predictions for the rest of the year. But it’s important to recognize that these trends too are evolving. So there’s some extra risk there.
Keeping all that in mind, it may be a good idea to stick to basics. And as far as basics go, the Zacks Rank tops the list. Because companies with Zacks Ranks #1 (Strong Buy) and #2 (Buy) have historically outperformed the market by several magnitudes.
And a buy-ranked stock within an attractive industry has even greater chances of success. Zacks classifies companies under 250+ industries and then ranks them. It has been seen historically that the top half outperforms the bottom half by a factor of more than 2 to 1. This happens because, at any given period of time, certain common factors work for all players within an industry. So when these factors are positive, all players stand to benefit.
So for example, when the pandemic forced people into isolation so they couldn’t travel, it was broadly seen that they opted to take road trips and boat trips so they could enjoy the outdoors while maintaining distance. This had a positive impact on the majority of auto and boat retailers.
After rank and industry, you can consider the VGM Score. However, at this stage it’s a good idea to clarify your own investment goals. Do you want to invest for the long-term or for the short term? Are you comfortable with higher risk if there’s the chance of higher returns?
The VGM Score essentially condenses and gives a value to the kind of mindset an investor has when selecting stocks. So if you want to buy and hold for the long term to minimize risk, you’re basically looking for value. If you’re more interested in growth, you might be open to more opportunistic investing. If you’re only interested in daily trade, you’re a momentum investor. The VGM Score is an average of the Value, Growth and Momentum Scores pertaining to a stock.
For this piece, I’m mainly focusing on growth at reasonable valuations (price-to-sales (P/S) and price-to-earnings growth (PEG), both of which should be less than 1)-
Celestica is one of the largest electronics manufacturing services company in the world, serving the computer and communications markets. The company provides competitive manufacturing technology and service solutions for printed circuit assembly and system assembly, as well as post-manufacturing support to many of the world's leading original equipment manufacturers. Celestica's extensive depth and breadth of offerings supports a wide variety of customer requirements from low volume, high complexity custom products to high volume commodity products.
Graphic Packaging is a leading provider of paperboard packaging solutions for a wide variety of products to food, beverage and other consumer products companies. Its customers include some of the most widely recognized companies in the world.
Zacks Rank #2
Industry: Containers - Paper and Packaging (top 31%)
Growth Score A
June quarter earnings beat by 36.8%
Expected Long-term Growth: 25.0%
Valuation: The P/S of 0.65X and PEG of 0.56X indicate that the current price is lower than both sales and earnings growth potential of the stock.
JELD-WEN Holding designs, produces and distributes interior and exterior doors, wood, vinyl and aluminum windows and related products for new construction and repair and remodeling of residential homes and non-residential buildings. The company's brand portfolio includes JELD-WEN (R), Swedoor (R), DANA (R), Corinthian (R), Stegbar (R) and Trend (R). It operates primarily in North America, Europe and Australia.
Zacks Rank #2
Industry: Building Products – Wood (top 1%)
Growth Score A
June quarter earnings beat by 161.1%
Expected Long-term Growth: 19.6%
Valuation: The P/S of 0.60X and PEG of 0.94X indicate that the current price is lower than both sales and earnings growth potential of the stock.
Lifetime Brands is a leading designer, marketer and distributor of kitchenware, cutlery & cutting boards, bakeware & cookware, pantryware & spices, tabletop and bath accessories, marketing its products under various trade names, including Farberware, KitchenAid, Pfaltzgraff, Cuisinart, Hoffritz, Sabatier, Nautica, DBK-Daniel Boulud Kitchen, Joseph Abboud Environments, Roshco, Baker's Advantage, Kamenstein, CasaModa and Kathy Ireland. Its products are distributed through almost every major retailer in the United States.
Tecnoglass is engaged in manufacturing and selling architectural glass and windows and aluminum products for the residential and commercial construction industries. It operates primarily in North, Central and South America.
Zacks Rank #2
Industry: Building Products – Retail (top 9%)
Growth Score A
June quarter earnings beat by 53.9%
Expected Long-term Growth: 20.0%
Valuation: The P/S of 0.68X and PEG of 0.62X indicate that the current price is lower than both sales and earnings growth potential of the stock.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
Image: Shutterstock
5 Cheap Stocks with Big Long-Term Growth Prospects
I know that the next few months are full of uncertainty. While things haven’t been as bad as expected, it’s still a fact that second quarter results are shaping up to be pretty weak.
In any normal year, investors would have been more than a little concerned about the 35.5% earnings decline for the S&P 500 on 11.3% lower revenues. Especially when the Zacks Consensus Estimate wouldn’t have been topped by 79.6% of these companies if that estimate hadn’t been drastically cut down in anticipation of dismal results. There would have been a lot more conservatism if these were the results in any normal year.
But therein lies the beauty of the stock market. Because wherever the market is, it’s a starting point for the next phase of investing. So if you’re a new investor, there’s no reason to rue the gains you might have made from using the dip. And if you’re not, it’s time to understand that whatever may have happened in the last few months, whether you ended up gaining or losing from the volatility, now is the time to put it behind you and take stock of what’s going to happen in the future. Because the ability to anticipate the future and invest accordingly is what generates positive returns.
And today, I don’t want to talk about too many numbers. I want to tell you how to search smartly to overcome near-term uncertainty and generate long-term gain. There may be many ways to do this. But the method I’ve chosen for today is fairly simple. You don’t need to understand all the numbers yourself. All you need to do is follow some principles of smart investing using Zacks methodology. So here goes-
First of all, we must recognize that third quarter beats are going to be tougher simply because analysts are adjusting estimates for the new normal as we exit this quarter. As things stand now, analysts expect third quarter revenue and earnings for the S&P 500 to come in a respective 3.7% and 23.8% lower than 2019. So there’s the need for caution.
Also, not many companies are providing numerical guidance although certain trends have emerged that we can use for predictions for the rest of the year. But it’s important to recognize that these trends too are evolving. So there’s some extra risk there.
Keeping all that in mind, it may be a good idea to stick to basics. And as far as basics go, the Zacks Rank tops the list. Because companies with Zacks Ranks #1 (Strong Buy) and #2 (Buy) have historically outperformed the market by several magnitudes.
And a buy-ranked stock within an attractive industry has even greater chances of success. Zacks classifies companies under 250+ industries and then ranks them. It has been seen historically that the top half outperforms the bottom half by a factor of more than 2 to 1. This happens because, at any given period of time, certain common factors work for all players within an industry. So when these factors are positive, all players stand to benefit.
So for example, when the pandemic forced people into isolation so they couldn’t travel, it was broadly seen that they opted to take road trips and boat trips so they could enjoy the outdoors while maintaining distance. This had a positive impact on the majority of auto and boat retailers.
After rank and industry, you can consider the VGM Score. However, at this stage it’s a good idea to clarify your own investment goals. Do you want to invest for the long-term or for the short term? Are you comfortable with higher risk if there’s the chance of higher returns?
The VGM Score essentially condenses and gives a value to the kind of mindset an investor has when selecting stocks. So if you want to buy and hold for the long term to minimize risk, you’re basically looking for value. If you’re more interested in growth, you might be open to more opportunistic investing. If you’re only interested in daily trade, you’re a momentum investor. The VGM Score is an average of the Value, Growth and Momentum Scores pertaining to a stock.
For this piece, I’m mainly focusing on growth at reasonable valuations (price-to-sales (P/S) and price-to-earnings growth (PEG), both of which should be less than 1)-
Celestica, Inc. (CLS - Free Report)
Celestica is one of the largest electronics manufacturing services company in the world, serving the computer and communications markets. The company provides competitive manufacturing technology and service solutions for printed circuit assembly and system assembly, as well as post-manufacturing support to many of the world's leading original equipment manufacturers. Celestica's extensive depth and breadth of offerings supports a wide variety of customer requirements from low volume, high complexity custom products to high volume commodity products.
Zacks Rank #2
Industry: Electronics - Manufacturing Services (top 13%)
Growth Score A
June quarter earnings beat by 66.7%
Expected Long-term Growth: 25.6%
Valuation: The P/S of 0.19X and PEG of 0.39X indicate that the current price is lower than both sales and earnings growth potential of the stock.
Graphic Packaging Holding Company (GPK - Free Report)
Graphic Packaging is a leading provider of paperboard packaging solutions for a wide variety of products to food, beverage and other consumer products companies. Its customers include some of the most widely recognized companies in the world.
Zacks Rank #2
Industry: Containers - Paper and Packaging (top 31%)
Growth Score A
June quarter earnings beat by 36.8%
Expected Long-term Growth: 25.0%
Valuation: The P/S of 0.65X and PEG of 0.56X indicate that the current price is lower than both sales and earnings growth potential of the stock.
JELD-WEN Holding, Inc. (JELD - Free Report)
JELD-WEN Holding designs, produces and distributes interior and exterior doors, wood, vinyl and aluminum windows and related products for new construction and repair and remodeling of residential homes and non-residential buildings. The company's brand portfolio includes JELD-WEN (R), Swedoor (R), DANA (R), Corinthian (R), Stegbar (R) and Trend (R). It operates primarily in North America, Europe and Australia.
Zacks Rank #2
Industry: Building Products – Wood (top 1%)
Growth Score A
June quarter earnings beat by 161.1%
Expected Long-term Growth: 19.6%
Valuation: The P/S of 0.60X and PEG of 0.94X indicate that the current price is lower than both sales and earnings growth potential of the stock.
Lifetime Brands, Inc. (LCUT - Free Report)
Lifetime Brands is a leading designer, marketer and distributor of kitchenware, cutlery & cutting boards, bakeware & cookware, pantryware & spices, tabletop and bath accessories, marketing its products under various trade names, including Farberware, KitchenAid, Pfaltzgraff, Cuisinart, Hoffritz, Sabatier, Nautica, DBK-Daniel Boulud Kitchen, Joseph Abboud Environments, Roshco, Baker's Advantage, Kamenstein, CasaModa and Kathy Ireland. Its products are distributed through almost every major retailer in the United States.
Zacks Rank #2
Industry: Consumer Products – Discretionary (top 10%)
Growth Score A
June quarter earnings beat by 58.3%
Expected Long-term Growth: 13.0%
Valuation: The P/S of 0.26X and PEG of 0.97X indicate that the current price is lower than both sales and earnings growth potential of the stock.
Tecnoglass Inc. (TGLS - Free Report)
Tecnoglass is engaged in manufacturing and selling architectural glass and windows and aluminum products for the residential and commercial construction industries. It operates primarily in North, Central and South America.
Zacks Rank #2
Industry: Building Products – Retail (top 9%)
Growth Score A
June quarter earnings beat by 53.9%
Expected Long-term Growth: 20.0%
Valuation: The P/S of 0.68X and PEG of 0.62X indicate that the current price is lower than both sales and earnings growth potential of the stock.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>