With many of the major stock indexes setting new all-time highs, bargains are not easy to find these days. The S&P 500 is about to hit 4,000, and valuations are spreading across most sectors; the index is trading at its highest price-to-earnings ratio since the financial crisis, when earnings slumped. Since Wall Street bottomed out last March, stocks have nearly doubled, prompting much speculation that the the stock market is in a bubble.
Despite this tough environment, you can still find stocks for sale today if you know where to look – and Williams-Sonoma (NYSE: WSM), Alibaba Group (NYSE: BABA), and Perion network (NASDAQ: PERI) all do the trick.
An undervalued housewares champion
Home furnishings retailers have been big winners during the coronavirus pandemic as Americans who have been forced to work and attend distance school have adapted by refreshing their homes, adding furniture from home office or by beautifying playrooms for their children.
Williams-Sonoma was no exception to this trend. Its same-store sales jumped 17% last year and profitability jumped dramatically, with adjusted operating margin increasing 560 basis points to 14.2%, while adjusted earnings per share increased. almost doubled to $ 9.04. In the fourth quarter, nearly 70% of the company’s sales came from e-commerce, making it more similar to Wayfair, the leader in online home goods retailing, than its brick-and-mortar retail peers.
The good news for investors is that management doesn’t view 2020 as fluke. It forecasts continued growth in 2021. In the directions of its recent earnings report, the company predicted revenue growth in mid to high single-digit percentages this year, and an increase in adjusted operating margin in line with its long-term forecast. This should allow the company to increase earnings per share by a double-digit percentage this year.
Despite the strength of its brands, which include West Elm and Pottery Barn in addition to its namesake, and a solid business model offering growth, income and profitability, the stock is trading at a fair price / earnings (P / E) ratio. 21, a significant discount to peers like Wayfair and HR (formerly known as Restoration Hardware) and significantly cheaper than the S&P 500. This seems like a mistake that the market will eventually have to correct.
A Chinese cheap tech giant
Almost 30% down from the all-time high reached in October, Alibaba certainly looks like a sell-off. The Chinese tech giant is the world’s largest e-commerce company, with an annual gross merchandise volume of more than $ 1,000 billion. It is also extremely profitable, thanks to the strength of its e-commerce business as well as its rapidly growing cloud computing segment and other businesses, such as logistics. In its most recent published quarter, revenue jumped 37% to $ 33.8 billion, and adjusted net profit rose 27% to $ 9.1 billion, giving it a margin 27% beneficiary. These numbers alone should tell you that Alibaba is doing phenomenal business. The stock is also very cheap, trading at a P / E ratio of just 26.
What has rocked investors lately is the Chinese government’s crackdown on the company, which began last fall when it blocked the initial public offering by Ant Group, the financial arm of Ali Baba. Concerns escalated after founder Jack Ma disappeared from public view after making critical comments about Chinese financial regulators. Concerns about his status turned out to be unfounded, but the Chinese Communist Party announced a antitrust investigation in the company in December, and earlier this month, the government asked Alibaba to sell its media assets, although it did not specify which ones.
Beijing appears to be looking to assert its power over the tech giant, but the government is not planning to dismantle it. Companies like Alibaba help attract foreign companies to China, which contributes to the government’s long-term goals of making it the world’s largest economy.
Considering this, this sale of Alibaba shares seems overdone. Stocks are expected to rebound as its growth will remain strong as e-commerce and the Chinese economy continue to expand.
An advantageous stock of advertising technology
Ad tech stocks were the big winners in 2020, and Perion Network was no exception as the platform’s growth on the supply side accelerated. Shares of Israeli small caps doubled last year and also rose through early 2021. However, after a pop following a hike in the company Orientation 2021, the stock fell 33% from its peak in early March. It is now trading at much lower levels than it was before raising its forecast.
After 51% revenue growth in the fourth quarter, which benefited in part from the company’s acquisitions of Content IQ and Pub Ocean, management expects revenue to increase 13% to 16% this year to reach 370 to 380 million dollars, although this forecast may prove conservative given Perion’s strong performance at the end of last year. It also forecasts revenue growth of 31% in the first quarter.
Even if this prediction turns out to be correct, Perion’s price is still like a bargain, trading at a P / E below 20 based on adjusted earnings per share of $ 0.91. The surge in streaming video consumption caused by the pandemic has accelerated the shift to ad technology platforms like the one operated by Perion, and the company is well positioned in areas such as connected TV or supported streaming media. advertising, where revenues jumped 132% in its most recently released quarter. Meanwhile, its display and social segment, which now represents more than half of the business, saw its revenue increase by 159%.
Looking at these numbers, Perion looks distinctly undervalued for its growth potential.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.Source link