The rally that catapulted U.S. equities to newer and higher valuations seems to have come to an end. The second quarter of 2024 has seen many stocks slip and lose their once rich valuations. Still, U.S.-listed stocks overall have become expensive, especially when compared to EU-listed stocks and emerging markets-based equities. At some point trading multiples will have to come back down to reality.
During this current bout of market volatility, investors should be screening for undervalued stocks. Stocks are considered “undervalued” when they trade below what people think their intrinsic value is. Basically, in this scenario, the market has not fully recognized the stock’s “true potential.”
Potential value investors can find many stocks that are undervalued if they look for stocks trading below a certain dollar amount per share. In this list, in particular, we will be looking at stocks I feel are undervalued that are trading at below $50 per share. These stocks have intriguing fundamentals and are operating in burgeoning sectors with strong secular tailwinds.
Frontline (FRO)
Frontline (NYSE:FRO) is a large oil tanker company boasting a fleet of 84 vessels that transport crude oil and refined products across the globe. Frontline’s stock performed very well in 2023, nearly doubling in price. As a result of OPEC’s production cuts, oil tankers have found themselves increasingly traveling across to the Atlantic Ocean to ship crude from Brazil, the U.S. and Guyana to countries in Asia. Those longer distances have pushed up ton-miles, or the amount of crude shipped and the distance, and as a result, revenue.
Continued geopolitical tumult in the Middle East has led many leading shipping companies, including Maersk (OTCMKTS:AMKBY), to abandon their routes through the Suez Canal due to recent attacks by Yemen-based Houthi rebels. That means ships from Asia destined for Europe (and vice versa) are largely electing to go around Africa to access the European continent. That will put upward pressure on ton-miles, which could generate a huge profit windfall for shipping companies. The U.S. and U.K. bombardment of “Houthi targets” in Yemen has stopped attacks on ships.
For its Q4’2023 earnings report, Frontline delivered some of its best financial figures in years. Revenue increased 27% year-over-year to a record $1.8 billion, while EPS increased 33% on a year-over-year basis to $2.95 per share. FRO shares only trade at 7.1x forward earnings.
Moreover, the recent collapse of a Baltimore bridge, which is located near an important port, as well as the dire situations at both the Suez and Panama canals, investors should expect shipping rates to remain elevated for quite some time.
ACM Research (ACMR)
ACM Research (NASDAQ:ACMR) is a semiconductor equipment manufacturer. In particular, ACMR supplies semiconductor manufacturers with wet processing equipment and technologies, and the manufacturer has a particular focus on China’s domestic semiconductor market.
ACM Research’s earnings results throughout 2023 were admittedly impressive and beat Wall Street’s estimates. Their recent Q4’2023 earnings report was no different. Full-year revenue climbed 43% year-over-year to $558 million. ACM Research expects solid double-digit revenue growth in 2024 as well. During this period, the company expects its Shanghai-based unit to grow substantially.
Furthermore, while ACMR has appreciated nearly 60% year-to-date, the company’s share price is trading at relatively cheap valuation multiples. ACMR’s forward EV/EBITDA is around 14.3x, and its forward price-to-earnings ratio is 21.4x, which are amongst some of the cheapest multiples in the semiconductor industry these days. ACM Research’s cheap multiples, coupled with its growth prospects, could help extend its rally, pushing its share price to new levels.
Harmony Gold Mining (HMY)
If there were a time to buy gold or gold stocks, it may have been since the beginning of March. Gold prices have soared since then. Nowadays, gold has appreciated more than 11%, outpacing both the S&P 500 and the Nasdaq Composite.
Harmony Gold Mining (NYSE:HMY) is one such gold miner that appears to be trading below where it should. This company in particular engages in the exploration, extraction and processing of gold with some of exposure to copper exploration through its Queensland, Australia-based mine. Last year, gold price growth was relatively slower when compared to the asset growth we witnessed in equities. As a result, Harmony grew revenues by a little over 15% on a year-over-year basis. 2024 could see revenue figures jump even more, especially if gold prices sustain this rally they’re in now.
Trading at 9.5x forward earnings, HMY could be a good bet to make right now.
On the date of publication, Tyrik Torres did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
