3 Stocks That Could Give Investors Deep Value Over Time

With the announcement of the fourth consecutive 75-bps rate hike last week, the Fed also set expectations for further, albeit rather smaller, interest rate hikes in the future until inflation is brought satisfactorily under control.

Furthermore, with the economy refusing to cool down fast enough, as evidenced by the latest employment data, we may have yet to see the last of this current episode of market volatility. Due to widespread market sell-off, most stocks have suffered significant price declines.

However, bargain hunters might find it suitable to load up fundamentally strong stocks on their dips. Such stocks currently trading at attractive valuations are well-positioned to witness a big rebound.

It could be wise for investors to buy quality stocks Stellantis N.V. (STLA), Albertsons Companies, Inc. (ACI), and KT Corporation (KT) trading at discounted valuations.

Stellantis N.V. (STLA)  

Headquartered in Hoofddorp, Netherlands, STLA is engaged in designing, engineering, manufacturing, distributing, and selling vehicles, components and production systems. The company’s portfolio of brands includes Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram, Peugeot, Citroen, DS Automobiles, Opel and Vauxhall, and Maserati.

On October 27, STLA announced that its Hordain facility would be the first to mass produce Peugeot, Citroën, and Opel light commercial vehicles in a hydrogen-powered version equipped with a fuel cell. This demonstrates the company’s commitment to supporting low-carbon mobility by investing in the latest technologies to attract a new generation of automobile owners.

On October 13, STLA announced the signature of the Framework Agreement between the Fiat Brand and the Algerian Authorities aimed at the local production of vehicles and the development of the automotive sector in Algeria.

Furthermore, on October 12, the company inaugurated a new software center in Bengaluru, India. The new center will focus on developing software and technological innovations crucial to the advancement of automobiles and mobility, in line with the long-term Dare Forward 2030 strategic plan. The new site is the company’s second global innovation center in the country.

STLA’s net revenues rose 21.2% year-over-year to €88 billion ($87.60 billion) for the first half-year that ended June 30, 2022. The company’s adjusted operating income increased 46.6% year-over-year to €12.37 billion ($12.31 billion), while its net profit increased 37.2% year-over-year to €7.96 billion ($7.92 billion).

In terms of forward P/E, STLA is currently trading at 2.42x, 81.3% lower than the industry average of 12.89x. The stock’s forward EV/Sales multiple of 0.14 is 86.9% below the industry average of 1.07. Also, its forward Price/Sales multiple of 0.25 compares to the industry average of 0.83.

STLA’s revenue is expected to come in at $181.95 billion for the fiscal year ending December 2023, indicating a 3.8% year-over-year increase. The stock has gained 6.3% over the past month to close the last trading session at $13.54.  

STLA's POWR Ratings reflect its positive outlook and stellar prospects. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

STLA also has an A grade for Value and a B for Stability, Sentiment, and Quality. It is ranked #2 of 64 stocks in the Auto & Vehicle Manufacturers industry.  

In addition to the POWR Ratings stated above, we have also given STLA grades for Growth and Momentum. Get all STLA ratings here.

Albertsons Companies, Inc. (ACI)

ACI operates as a food and drug retailer in the United States. The company offers groceries, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services through its food and drug stores or digital channels.

On October 18, ACI announced a cash dividend of $0.12 per share of Class A common stock for the third quarter of 2022, payable on November 14, 2022. The company pays $0.48 as dividends annually which translates to a yield of 2.26% at the current price. This is better than the 4-year average dividend yield of 2.17%.

On October 14, 2022, ACI and Kroger Co. (KR) entered a definitive merger agreement. Under this agreement, unanimously approved by the board of directors of both companies, KR will acquire all of the outstanding shares of ACI for an estimated total consideration of $34.10 per share, implying a total enterprise value of approximately $24.6 billion, including roughly $4.7 billion of ACI’s net debt.

The combined company is expected to drive profitable growth and sustainable value for all stakeholders.

For the second quarter of fiscal 2022 ended September 10, 2022, ACI’s net sales and other revenues increased 8.6% year-over-year to $17.92 billion, while its operating income increased 9.3% year-over-year to $531 million. Also, the company’s adjusted EBITDA increased 8.6% year-over-year to $1.05 billion.

In addition, ACI’s adjusted net income and net income per share came in at $418.3 million and $0.72, up 13.2% and 12.5% year-over-year, respectively.

In terms of forward P/E, ACI is currently trading at 7.17x, 61.9% lower than the industry average of 18.8x. The stock’s forward EV/Sales multiple of 0.30 is 83.2% below the industry average of 1.76. Also, its forward Price/Sales multiple of 0.15 compares to the industry average of 1.22.

Analysts expect ACI’s revenue for the fiscal 2023 third quarter (ending November 2022) to increase 4.3% year-over-year to $17.45 billion. The company’s revenue for the current fiscal year is expected to increase 6.5% year-over-year to $76.56 billion. Moreover, the company has surpassed the consensus revenue estimates in each of the trailing four quarters.

Over the past month, the stock has gained 9.3% to close the last trading session at $21.26.

ACI’s overall A rating translates to a Strong Buy in our POWR Ratings system. It also has grade A for Value and Grade B for Quality.

In the A-rated Grocery/Big Box Retailers industry, it is ranked #10 of 38 stocks. Click here for ACI’s additional POWR Ratings for Growth, Stability, Sentiment, and Momentum.

KT Corporation (KT)

Headquartered in Korea, KT is a leading telecommunications service provider. The company operates through four segments: Information and Communications Technologies; Finance; Satellite Broadcasting; and Other.

On October 7, KT announced that it would strengthen its strategic alliance with Hyundai Motor Company (HYMTF). KT will expand the Connected Car business, for which the company has been collaborating with HYMTF for many years, and further plans to provide communication modules and connectivity to HYMTF's domestic and overseas OEM vehicles.

Both companies decided to acquire shares of each company mutually through a treasury stock exchange on September 7 to strengthen and enhance the momentum and continuity of their long-term partnership.

For the second quarter of the fiscal year 2022, KT’s operating revenue increased 4.7% year-over-year to ₩6.31 trillion ($4.49 billion). During the same period, the company’s EBITDA increased 1% year-over-year to ₩1.39 trillion ($987.53 million). The company’s net assets at the end of fiscal 2022 second quarter stood at ₩39.01 trillion ($27.81 billion), compared to ₩34.14 trillion ($24.30 billion) a year ago.

In terms of forward P/E, KT is currently trading at 6.54x, 54.9% lower than the industry average of 14.48x. The stock’s forward EV/Sales multiple of 0.89 is 51.5% below the industry average of 1.83. Also, its forward Price/Sales multiple of 0.47 compares to the industry average of 1.18.

Analysts expect KT’s revenue for the fiscal year ending December 2023 to increase 4.9% year-over-year to $13.58 billion, while its EPS is expected to increase marginally year-over-year to $2.01. The stock has gained 2.2% over the past month and 3.2% year-to-date to close the last trading session at $12.99.

In line with its steady outlook, KT has an overall rating of B, which translates to a Buy in our POWR Ratings system. It also has Grade A for Value and Stability. KT is ranked #7 of 46 stocks in the A-rated Telecom - Foreign industry.

In addition to the above, additional ratings for KT’s Momentum, Sentiment, Quality, and Growth are available here.

STLA shares were trading at $13.80 per share on Monday afternoon, up $0.26 (+1.92%). Year-to-date, STLA has declined -26.44%, versus a -19.11% rise in the benchmark S&P 500 index during the same period.

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities.

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