The current bull market still shows outstanding resilience. Already the longest in US history, it is set to turn 11 in March. While there are currently no major signs that a recession is imminent, investors will want to think about becoming increasingly conservative and cautious when it comes to choosing stocks to invest. This can lead to a transition from expensive momentum games to value and overlooked opportunities. Here are three companies that currently show underestimated metrics that look like good purchases.
JinkoSolar (NYSE: JKS) is among the world's largest manufacturers of solar cell modules. The company's products offer renewable energy technology to global tools, as well as commercial and residential customers. Based in China, JinkoSolar has about 2,000 customers in over 1
The manufacturer of photovoltaic modules has seen strong progress in 2019. At the end of October, JinkoSolar announced that it supplied modules worth 13.6 megawatts (MW) to Photon Energy Solutions in Hungary. The solar modules are used to develop 19 solar power plants.
In September 2019, JinkoSolar announced to win a contract to supply 300 MW of its "ultra high efficiency Cheetah modules" for a massive solar power plant to be installed in Talavan, Caceres, Spain. The project continues to build credibility for one of the world's largest suppliers of solar cell modules.
As the prospects for solar power continue to look bright, JinkoSolar Holdings appears to be quite undervalued with a price-to-earnings-growth (PEG) ratio of 0.47, a price-to-sales ratio (P / S) of 0.16, and a price-to-book (P / B) ratio of 0.49.
PEG is calculated by taking a price-to-earnings ratio and dividing it by the company's earnings growth rate over a specified period. A PEG value greater than 1 is considered to be overestimated, while a reading of less than 1 indicates an underestimated condition. JinkoSolar's current PEG ratio shows a 53% discount as of this writing.
The P / S ratio is determined by dividing a company's market share by total revenues over the past year. With a P / S of only 0.16, JinkoSolar trades with a steeper discount on sales than larger peers Canadian Solar (P / S ratio of 0.32) and SunPower Corporation (P / S ratio of 0.73).
The P / B ratio is found by taking the stock price and dividing it by book value per share. Book value is calculated by subtracting a company's total liabilities from its total assets. JinkoSolar's P / B ratio trades at a convincing 51% discount. When compared to Canadian Solar (P / B ratio of 0.81) and Sunpower (negative P / B ratio), the ratio looks even more enticing and undervalued.
These valuation metrics serve as a signal for investors to take a look at the company.
KEMET (NYSE: KEM) is a manufacturer of electrical components, which is the key to ensuring that products such as computers, consumer electronics and other related goods work properly and efficiently. Part of the industry's growth can be attributed to the development and implementation of advanced technologies such as 5G networks and electric vehicles, as well as continued growth in Internet usage.
KEMET was founded in 1919 and maintains a global footprint of 23 manufacturing facilities in 11 countries. During the company's fiscal year ended March 2019, KEMET supplied 54 billion electrical components.
Over the past four quarters, KEMET has beaten revenue estimates, and as a result of its strong earning power, analysts are jumping on the bandwagon. Three months ago, KEMET had no analyst rating. Currently, the company has four analyst ratings, all with a "buy."
The company trades at a significant discount to the total market, which is noted by the price-to-earnings ratio of 6.04, compared to the S&P 500's P / E ratio of around 22.55. KEMET also trades with a 50% discount on earnings growth and a 10% discount on sales. This can be seen with PEG of 0.5 and P / S of 0.9. KEMET also has a very impressive level of profitability: return on equity (ROE) of 35.8%, return on investment (ROI) of 25.7%, and return on assets of 16.4%. https://finviz.com/quote.ashx?t=KEM&ty=c&p=d&b=1 Chapter19659005 ?? These numbers indicate that KEMET is undervalued and overlooked. The market does not seem to take into account important growth sources on the horizon: electric vehicles, 5G, renewable energy, Internet of Things and more. Did you know that the average Tesla vehicle requires around 10,000 electrical capacitors? Apple's new iPhone X uses 1000 electric capacitors. This highlights the high demand for electrical components, especially as new and advanced technologies continue to gain steam.
NETGEAR (NASDAQ: NTGR) recently reported third quarter 2019 earnings results. On the bright side, revenues in the third quarter hit projections, but revenues were lower than expected. From year to year, both revenues and revenues declined.
The company reported net revenues of $ 265.9 million (down 1.3% the year before) and GAAP net income per diluted share of $ 0.39 (down $ 0.10 year-over-year).
The communications equipment company saw its results slow down by the decline experienced outside the United States. Fortunately, NETGEAR's net income from the Americas region – which accounts for 67% of total sales – increased 1.6% year-on-year. Lack of performance in Asia and Europe was largely attributed to macroeconomic and geopolitical events, such as the effects of the trade war, Hong Kong protests and more. In its earnings release, management noted plans to reduce sales exposure and the workforce in China and Europe due to the effects of the trade war.
The company could also see a boost as the US positions itself to upgrade to the next generation Wi-Fi connection, Wi-Fi 6, in the coming months. When NETGEAR has a 51% market share of Wi-Fi connection products in the US, this may prove to be a strong catalyst for the company.
As NETGEAR appears to be positioning itself for the launch of Wi-Fi 6 and reducing exposure to adverse macro environments, value investors may be interested in this technology company, which is currently trading at an undervalued PEG ratio of 0.29 and P / S ratio of 0.94.
When you compare NETGEAR's valuation with two of its most notable competitors, Broadcom and Cisco Systems ) NETGEAR is very underrated. Both competitors have PE potential. Broadcom and Cisco Systems are even more overvalued when they compare their price-to-sales ratio, which in turn exceeds 2. NETGEAR's leading market share and undervalued state compared to key competitors make it an interesting value game for 2020.