Value stocks

4 Best Value Stocks to Buy Right Now

TThe market doesn’t seem particularly cheap right now, but that doesn’t mean you still can’t find pockets of value. Here are three stocks that look like great values ​​on a price-to-free movement of capital (FCF).

Siemens

German industrial giant Siemens (OTC: SIEGY) has a 2.6% dividend yield and generates significant cash flow. In addition, its industrial growth activities offer a lot to investors. His automation, industrial software and smart building solutions offer interesting growth prospects. All of these solutions benefit from the Fourth Industrial Revolution, the trend to digitize factories and connect physical assets to the digital world.

Image source: Getty Images.

Meanwhile, Siemens’ majority stake in healthcare giant Siemens Healthineers gives it stability during times of economic weakness. His FCF can be used to support investment in more cyclical industrial companies. Siemens mobility activity (rolling stock, rail infrastructure, customer service) gives the company a solid FCF and diversification of its revenues.

According to Wall Street analysts’ estimates, Siemens is currently trading at just 17 times 2021 FCF. Also, the bond markets love the company so much that they were able to issue debt with negative returns in the past. All of this makes for a compelling proposition for long-term investors.

The Goodyear Consolidation Game

Automotive parts inventory have underperformed the market in recent years. The reason is probably their exposure to the slowdown in auto production. Most automotive suppliers are combinations of aftermarket parts and original equipment (OEM). The aftermarket is relatively low growing and the OEM market is relatively low and cyclical.

However, there are strong arguments that Good year‘s (NASDAQ: GT) the valuation is too low when viewed in terms of expected free cash flow. The key to the investment thesis is its mid-2021 acquisition of Cooper Tires. The agreement strengthens Goodyear’s presence in the US aftermarket and the Chinese OEM market, where Cooper is relatively more robust.

A service technician installing a new tire.

Image source: Getty Images.

In addition, management estimates that the merger of the Goodyear and Cooper businesses will enable it to generate $ 165 million in annual cost synergies within two years. These cost savings will flow through to improved earnings and FCF for Goodyear. Based on 2019 numbers, and assuming the $ 165 million in synergies, the new Goodyear would have generated $ 690 million in FCF in 2019.

Additionally, Wall Street analysts have Goodyear generating just over $ 700 million in FCF in 2022. Based on the current market cap of $ 5.28 billion, the stock would trade at just 7.5. times FCF in 2022. This estimate seems too low, especially since 80% of Goodyear’s sales go to the replacement market.

Two electrifying actions

I group these two together because they have similar investment theses. In addition, the two companies are plays for the “electrification of the economy”. Whether through electric cars, industrial automation, smart buildings (see Siemens above), data and networks, renewables (transmission and distribution) or transport, the global economy is electrifying.

nVent (NYSE: NVT) focuses on connection and protection products (enclosures, fixing systems and thermal management solutions). Granted, it’s pretty mundane and inexpensive, but it’s part of the allure of buying stocks. In summary, nVent products are essential for protecting equipment and enabling customers to meet regulatory standards. Nor are these the kinds of expenses that customers seek to cut when a downturn occurs.

An electrician working on an electrical junction.

Image source: Getty Images.

Management believes it can grow its income at a rate of 1% to 2% plus GDP in the long run, a figure likely equivalent to average single-digit revenue growth and EPS growth of 7% to 10. %. Trading at around 17 times estimated FCF in 2021, nVent remains a good value.

Hubbell (NYSE: HUBB) manufactures electrical, lighting and power components used in wide areas of end markets including commercial, industrial, residential buildings, data centers and power grids. As such, it is a game on electrification, and in particular on expenditure on transport and distribution of electricity.

In addition, it is a market driven by the need to modernize aging infrastructure and build networks for renewable energy projects. Trading below 20 times the 2021 FCF estimate, Hubbell is also good value for investors.

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Lee samaha holds shares in Siemens Aktiengesellschaft. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.