Affordable Stocks to Consider by Investors in the Month of December
Hold Up, Buddy! These Cheap Stocks Are a Bargain Special for Fundamental Investors!
Wall street is on a roller coaster ride, with market valuations skyrocketing left and right. With many stocks apparently overvalued, you might wonder, what stocks should a smart investor consider now? Let's take a closer look at three bargain stocks that could be just what the doctor ordered.
Bargain bin picks
Here are three stocks that have either taken a hit from the market recently or still maintain an attractive valuation despite the overall market rally.
Prosus (P/E: 2.8)
First up is Prosus, a tech powerhouse with a hefty stake in the Chinese giant Tencent. But that's not all, Prosus' management has been diversifying its investments into venture capital, such as BUX, a trading app, Udemy, an online learning platform, and more.
But, Prosus is currently trading at a 35% discount to its Net Asset Value (NAV) and boasts a P/E ratio of just 2.8. Analysts project a 43% upside potential here, and the management is backing this up with massive share buybacks.
The Gap (P/E 12.3)
Next on the list is The Gap, a US retail company in the fashion sector. Despite analysts' predictions of robust profit growth well above the industry average in the coming years, The Gap is valued at a modest 12.3 times earnings. Plus, The Gap offers a dividend yield of 2.4% for investors.
Star Bulk Carriers (P/E 6.3)
For dividend hunters, the stock of Star Bulk Carriers is hard to ignore. Apart from a generous dividend yield of 13.8%, Star Bulk is trading at a 64% discount to the average P/E ratio over the past five years and a 70% discount compared to the already affordable industry average.
Extra reading:
Deutsche Bank's Prediction: How High Will the DAX Climb in 2025 and What Are the Most Promising Stocks?
Or:
MDAX Stock Nosedive - Sell Now, Says Analyst
Now that we've talked about these low-priced stocks, let's dig a little deeper into the reasons behind those affordable prices.
Factors contributing to low P/E ratios
Prosus:- Prosus's low P/E ratio may be due to lingering fears surrounding the company's recent losses, dependency on specific investments like Tencent, and market volatility. However, the company's strong e-commerce performance and efficiency improvements have led to a profit of $179 million in FY25, marking a sharp reversal from a $118 million loss the previous year.- Prosus's share buybacks might have boosted earnings per share and are aimed at improving the company's valuation amid operational risks.
The Gap:- Lower P/E ratios in retail companies like The Gap can stem from uncertain consumer demand, competitive retail environment, inflationary pressures, and margin pressures that affect future earnings potential.- Retail sector P/E ratios tend to be moderate to low when investors anticipate slower growth or structural challenges in the retail space compared to tech or high-growth sectors.
Star Bulk Carriers:- Shipping companies like Star Bulk Carriers typically have low P/E ratios due to cyclical industry dynamics, global trade volatility, and vulnerable exposure to freight rates affecting earnings stability.
Potential for growth
Prosus:- Prosus has shown promising growth with a 21% increase in e-commerce revenue, improved aEBITDA, and margin expansions, providing evidence of ongoing growth prospects and investor confidence.
The Gap:- The growth potential in retail depends on factors such as brand revitalization, e-commerce expansion, and cost management. Though not detailed here, trends within the industry suggest cautious optimism as retailers adapt to changing consumer behavior and supply chain challenges.
Star Bulk Carriers:- The growth potential for shipping companies like Star Bulk Carriers is linked to global trade recovery, rising demand for dry bulk shipping, and improvements in freight rates, which are contingent on broader macroeconomic factors and geopolitical stability.
Dividends Potential
Prosus:- Prosus's strong free cash flow generation and net cash position support sustainable dividends and ongoing buybacks, making it a strong choice for income-focused investors.
The Gap and Star Bulk Carriers:- While Dividend data isn't available, these companies may have moderate to low dividend yields due to either reinvestment needs or earnings volatility. However, energy companies like Star Bulk Carriers might be more conservative with dividends due to cyclical earnings dynamics.
- For investors seeking opportunities in personal-finance and investing, Prosus' P/E ratio of 2.8 and current discount to Net Asset Value (NAV) might make it an attractive choice, with analysts projecting a potential upside of 43% and the management initiating massive share buybacks.
- The Gap, a US retail company with a P/E ratio of 12.3 and a dividend yield of 2.4%, could be a potential investment for those interested in personal finance, especially given analysts' predictions of robust profit growth in the coming years.
