7 valuable stocks to buy in this expensive market

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Value stocks are always in vogue. But after nearly 18 months of investors being able to find growth in the usual and unusual places, value stocks have been squeezed out. This time, they said, was different.

It wasn’t and it isn’t. If the recent market selloff has taught investors anything, it’s that fundamentals matter. And fundamentals are where value stocks thrive. You can ask 10 investors and get 10 different definitions of what defines a value stock. But all investors agree that value stocks are undervalued stocks no matter what metric they use.

This is where things get complicated. Even though some stocks have lost 20% or more in value, many are still overvalued by traditional indicators. But if you know what you’re looking for, you can still find value stocks in many sectors.

Here are seven undervalued stocks. Like most value stocks, these are mature companies, many of which pay dividends:

  • Target (NYSE:TGT)
  • Dick Sporting Goods (NYSE:SDKs)
  • AbbVie (NYSE:ABBV)
  • Ford (NYSE:F)
  • Rent-A-Center (NASDAQ:RCII)
  • winnebago (NYSE:WGO)
  • Dard Restaurants (NYSE:DRI)

Value Stocks: Target (TGT)

Source: jejim / Shutterstock.com

The economy received some good news when the US Census Bureau released its Advance Monthly Sales Report which showed retail sales rose 3.8% in January from the seasonally adjusted figure for December. Now, target investors will see if that’s enough to reverse the downtrend that has seen shares of TGT fall 22% since mid-November.

Retail stocks were in something of a Santa Claus rally that reversed with disappointing December data. But this better-than-expected news could allow investors to focus on Target’s fundamental strength. One of the categories that showed significant month-over-month growth was ‘non-store sales’. This includes digital sales and Target was already well positioned for omnichannel sales before the pandemic.

Target has a price/earnings ratio of 15.21x, which suggests a fair valuation. However, its price/earnings/growth ratio (which offsets the P/E ratio for growth) suggests that TGT stock is undervalued. Combined with growing revenue and earnings, as well as a safe dividend, Target stock looks like a good value stock.

Dick’s Sporting Goods (DKG)

Exterior of Dick's Sporting Goods retail store, including sign and logo.

Source: George Sheldon via Shutterstock

Dick’s Sporting Goods is another business likely to benefit from increased retail sales. The business was a strong stock during the pandemic as people bought exercise equipment and clothes to work out at home. The trend continued in 2021 with the reopening of youth sports.

Trends suggest that Americans will likely continue to prioritize their health and fitness. It’s setting up well for Dick’s which has improved its digital footprint which now includes a youth sports app (where was that 10 years ago?).

And after falling 25.8% in mid-November, DKG stock appears to have found support. The stock has a price-earnings ratio of 8.42x, which is below the industry average. And Dick’s is a financially sound company paying a sustainable dividend in line with its peers.

Analysts give DKS stock a 20% upside with a price target of $130.89. However, in January, the company secured favorable upgrades, including above-consensus price targets.

Value stocks: AbbVie (ABBV)

Abbvie (ABBV) website and logo on mobile phone

Source: Piotr Swat / Shutterstock.com

When it comes to value stocks, there aren’t many that fit the description better than AbbVie. In late August, ABBV stock gave up most of its 2021 gains. But when the flight to value hit in November, investors flocked back to AbbVie.

So, with ABBV stock up 36% since mid-September, is there still growth? The consensus opinion of analysts suggests not. However, after issuing a mixed earnings report (the company beat earnings but missed revenue), JPMorgan raised its price target for AbbVie to $180, which would represent a nearly 25% gain.

However, the report wasn’t really bad at all. AbbVie posted strong margins that helped it beat net income by 3 cents. Additionally, the company has released earnings growth forecasts that will be above analysts’ consensus opinion for 2022.

Even with less growth, many investors are buying AbbVie for a reliable dividend. The company is part of the elite Dividend Aristocrat club which has increased its dividend over the past 50 years.

Ford (F)

Ford dealership (F) sign against a blue sky.

Source: DK Grove / Shutterstock.com

By most fundamentals such as the P/E ratio and PEG ratio, Ford is slightly undervalued compared to its peers. F stock is currently up 10%, which is most likely contained due to concerns that the company’s earnings fell short of analysts’ expectations. However, investors seem willing to give CEO Jim Farley the benefit of the doubt as he executes his cost-cutting initiatives.

Ford stock hasn’t been swept away by the electric vehicle (EV) mania of early 2021. However, since the air has broken out of that bubble, investors are taking another look at Ford. And they like what they see on the front of electric vehicles.

Specifically, as an incumbent automaker, Ford will likely be able to deliver on its promise to electrify its fleet. He’s already seeing strong sales of his Mustang Mach-E, and the company had to halt pre-orders for the company’s F-150 Lightning. It’s always a nice problem to have.

Stocks of value: Rent-A-Center (RCII)

A photo of the Rent a Center (RCII) logo on a storefront in Los Angeles, California.

Source: David Tonelson/Shutterstock.com

If you are of a certain age, inflation gives you that feeling of deja vu. If you lean into this groove, you can see why Rent-A-Center is enjoying a resurgence. When inflation becomes high, as it did in the late 1970s and early 1980s, items like furniture and electronics become out of reach for middle to low income households.

Personal finance professionals may hate the commercial model, but the pay-as-you-go model is a convenient way for many consumers to furnish homes and apartments. And that’s not the only catalyst. Many Americans have decided to move to other areas and that may also mean temporarily furnishing their new homes until they settle down.

RCII stock has been falling since mid-August despite the company releasing two strong earnings reports. Investors may worry about slowing growth. But with inflation likely to persist, Rent-A-Center looks like a bargain near its 52-week low. This is all the more true if the company pays a dividend which, on a yield basis, is significantly better than the average S&P500 companies.

Winnebago (WGO)

A photo of a motorhome on the side of the road

Source: Tupungato / Shutterstock.com

Recreational vehicle (RV) manufacturers have been the big winners from the pandemic. As Americans searched for safe, socially distanced transportation, a house on wheels seemed very appealing. Companies such as Winnebago had backorders to fill and continue to do so.

At some point, you might expect demand to decline to historic lows. And the company’s revenue and profit forecasts are expected to be lower for the next five years than they have been for the past five. However, for now, the WGO stock has room to run. The company’s P/E ratio of 7.13x is below the industry average of 9.92x.

Winnebago has been trading within a defined, albeit fairly wide, range since the summer of 2021. That being said, the stock is trading at the low end of this range and analysts have a price target of $91.57 for the price. share, which represents an increase of 35%. That should help investors net a reliable dividend, though not among the highest in the industry.

Value Stock: Darden Restaurants (DRI)

olive garden (dri) sign on front of building

Source: various photographs / Shutterstock.com

Last on our list of value stocks is Darden Restaurants. The Wall Street Journal recently reported on a recent Kastle analysis of industry statistics that showed restaurants were nearly three-quarters as full as before the pandemic. Darden was one of the biggest beneficiaries, but like the rally, the DRI stock’s 24% gain was rocky and rocky.

Although the company’s P/E ratio puts it a bit pricey, this should be offset by the company’s strong earnings and revenue growth, which is expected to continue as mask mandates and masking requirements of vaccines continue to decline.

Additionally, after cutting its dividend sharply at the start of the pandemic, the company has now increased the dividend by 25% from its pre-pandemic level. That’s a pretty sweet reward for shareholders, even if analysts only give DRI stock a 13% upside from its current level.

As of the date of publication, Chris Markoch had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.

Chris Markoch is a freelance financial writer who has covered the market for eight years. He has been writing for InvestorPlace since 2019.

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