Growth stocks tend to be exciting: the companies that support them typically increase their earnings at a relatively rapid rate, with stocks following suit. But there’s a problem: Growth stocks aren’t always attractively priced. If you buy one when it is overvalued, it has a good chance of declining in the short term.
So you might consider being more of a value investor, looking for terrific undervalued stocks. Better yet, you could look for fast-growing companies with undervalued stocks. If you find them, you’ll end up with stocks that reflect both growth and value.
Here are three stocks that look significantly undervalued, and each of them could also be considered a growth stock. They’re good candidates if you have $5,000 to spend — and even if you have $1,000 or $50,000 to spend.
Metaplatforms (NASDAQ: META) is the company you may know as Facebook, but it changed its name in 2021 to reflect the scope of its operations and ambitions beyond its original social media platform. Its social media operations are quite huge, however, with nearly 3 billion monthly active users and almost 2 billion daily active users for Facebook alone. When you add its other platforms – which include Instagram, Messenger and WhatsApp – it has almost 3 billion daily active users.
Meanwhile, according to the company, “Meta is moving beyond 2D screens to immersive experiences like augmented and virtual reality to help build the next evolution of social technology” – thus its other core division, “Reality Labs “. So far, it’s far from a big money-making business, but management has high hopes for it. The company is also looking for additional profits from expanding e-commerce operations, greater use of artificial intelligence to generate content recommendations, and its response to TikTok videos – the reels.
So why might Meta Platforms be a valuable stock? Well, its recent performance has disappointed investors, and their responses to its results, along with the general market downturn, have sent its shares down nearly 60% from their 52-week high. Now they are trading at a forward price-earnings ratio of 14, well below their five-year average of 27. This could be a great buying opportunity for long-term believers in Mark Zuckerberg and his company.
ServiceNow (NYSE: NOW), has a market cap of more than $90 billion, but its shares have fallen about 36% below their 52-week high this year. The software-as-a-service company describes itself as follows: “Our cloud-based platform and solutions help digitize and unify organizations so they can find smarter, faster and more efficient ways to move the work forward” and so “employees and customers can be more connected, more innovative and more agile.”
Its second quarter saw subscription revenue of $1.7 billion, up 25% year over year, and total revenue of $1.8 billion, up 24%. Subscription revenue can be a big plus for a business because it tends to repeat on a regular basis, making management planning easier. The company also noted, “ServiceNow continues to expand its global footprint with more than 100 customers now paying more than $10 million in annual contract value in Q2 2022, up more than 50% year over year. the other.
Clearly, this is an attractive company – and it’s also trading at attractive levels, with a recent forward price-to-earnings ratio of 52, well below its five-year average of 80.
3. ASML Operation
Based in the Netherlands ASML Company (NASDAQ:ASML) is, in its own words, “a leading supplier to the semiconductor industry. The company provides chipmakers with hardware, software and services to mass-produce the designs of integrated circuits (microchips). In collaboration Together with its partners, ASML is driving the advancement of more affordable, more powerful and more energy-efficient microchips.” Its market capitalization was recently close to $185 billion and it employs some 35,000 people.
The company’s second quarter report was a bit mixed. On the one hand, it recorded a record level of new orders and the company’s order book stands at around 33 billion euros, reflecting strong demand for its products. On the other hand, the company (like many others) is under pressure due to supply chain issues and inflation. In response, management lowered its expectations for revenue growth and profitability.
Its shares, meanwhile, have recently fallen about 47% from their 52-week high. Yes, it faces headwinds, but those headwinds probably won’t last forever. The stock’s recent price-to-cash-flow ratio was recently at 20, well below its five-year average of 37, suggesting undervaluation. At this level, it should attract the attention of investors.
These are just a few of the many stocks with compelling value, and many of these companies have grown rapidly as well. Take a closer look at the ones you care about to see if they deserve a place in your long-term portfolio.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Selena Maranjian holds positions at ASML Holding, Meta Platforms, Inc., and ServiceNow, Inc. The Motley Fool holds positions and endorses ASML Holding, Meta Platforms, Inc., and ServiceNow, Inc. The Motley Fool has a Disclosure Policy.