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Value investing has long been a popular and successful style of investing. Essentially, value investors will search for stocks that appear to be trading for less than what the company should be valued at. This means that they can pay less for a company than what it should be prices and value investors thus look for “deals” in the market. Each investor will have their metrics to value a company. Some measures include price multiples like the P/E ratio of P/S ratio as well as factoring in relative value to industry peers.
But at its simplest level, value investing can be as easy as basic as identifying which stocks have lagged others, especially during a bull market rally like we’ve seen in 2024. Finding these undervalued stocks while others are chasing higher multiples is a great way to pivot from crowded trades. Here are three undervalued large-cap stocks that can perform well in March.
Apple Inc (AAPL)
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Apple Inc (NASDAQ:AAPL) is a company that truly needs no introduction. For years it has been the world’s most valuable company until a quarter of poor performance to start 2024 has deflated its value. According to Yahoo! Finance, 39 financial analysts cover the stock with a one-year price target range of $158.00 to $250.00. The average price target of $201.41 is about $30.00 higher than Apple’s current price.
Apple’s revenues were so high, it was nearly impossible to maintain its growth. Until last quarter, Apple had suffered from four consecutive quarters of year-over-year sales declines. But there is hope for the bulls. Apple has abandoned its electric car plans and focused the team on generative AI. Expect a major AI announcement at some point this year from Apple.
Apple’s stock now trades at 26x forward earnings which is cheaper than other big tech stocks like Amazon or Tesla. It also trades at about 25x free cash flow. Both metrics are slightly higher than the historical average for the stock. The gross margin remains strong at about 45% and this should continue to improve as Apple moves more towards software services.
Starbucks Corporation (SBUX)
Starbucks Corporation (NASDAQ:SBUX) is an American multinational coffee and beverage company founded in 1971 in Seattle, Washington. As per Yahoo! Finance, 29 financial analysts cover this stock with a one-year price target range of $95.00 to $127.00. The average price target is $106.60 or about $15.00 more than the current price of SBUX.
You might be surprised to see that Starbucks is currently trading below the lowest analyst price target for the stock. It’s been a tough year for shareholders as SBUX is down by nearly 3.0% in 2024 and more than 8.0% over the past 52 weeks. The sell-off for Starbucks has been aggressive, especially considering revenue for the fiscal year 2023 was up by 12% from 2022. On top of that, management continues to open stores around the world and expects to open 15,000 new stores by 2030. This would bring its global footprint to 55,000 locations.
The sell-off in SBUX has the stock trading at its lowest price multiples in years. Shares are trading at just 22.3x forward earnings and 2.8x TTM sales. This management team continues to execute and has grown revenue by 45% over the past five years.
Snowflake Inc (SNOW)
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Snowflake Inc (NYSE:SNOW) is an American cloud-computing company that was founded in 2012 and based in Montana. It’s been a volatile few months for Snowflake shareholders and that is reflected in the price targets for the stock. As per Yahoo! Finance, the stock has an average one-year price target of $217.05 which is about $55.00 more than the current price.
Shares took a beating in February when the company announced its quarterly earnings. Not only did Snowflake provide poor guidance but the CEO suddenly retired. As you probably know, these two things are not looked at kindly by shareholders or Wall Street. Revenue growth is decelerating as the company matures which is another reason why the stock has fallen so hard.
With a company like SNOW, the stock is always going to trade at a high valuation. Even after the decline, SNOW trades at 19x sales and 204x forward earnings. One thing to focus on for subscription-based businesses is the net revenue retention. This is how much revenue you can add to your existing customer base each year. Snowflake’s is an impressive 131% with 691 Forbes Global 2000 customers. After a relentless sell-off following earnings, Snowflake is positioned to rebound in March.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (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.comPublishing Guidelines.
Chandler Capital is the work of Ian Hartana and Vayun Chugh. Ian Hartana and Vayun Chugh are both self-taught investors whose work has been featured in Seeking Alpha. Their research primarily revolves around GARP stocks with a long-term investment perspective encompassing diverse sectors such as technology, energy, and healthcare.
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