Here are 10 High-quality Stocks that are Still Undervalued
S&P 500 is trading near its highest valuations since the Covid Bubble, and the opportunities are naturally rare.
Here are 10 high-quality stocks that are still undervalued:
P/E Ratio: 15
5-Year Revenue CAGR: 10%
Return on Capital Employed: 10.3%
Both medical costs and the activity rates increased beyond the industry's expectations this year.
UNH suffered more from this trend as it had absorbed over 900,000 new members who came from other providers that refused to extend their coverage at the current prices.
It has filed for price increases for 98% of its plans for the next year, and they are implementing strict cost controls for the remainder of this year.
Superinvestors like Warren Buffett, Michael Burry, and Chris Davis bought the stock.
The management expects to return to growth next year, in which case, the stock can return to all-time highs, offering 58% upside from here with a limited downside potential.
Image
P/E Ratio: 14
5-Year Revenue CAGR: 8.5%
Return on Capital Employed: 18.9%
It's trading near its lowest valuation in years.
The growth slowed down substantially last year, dipping around 1% in Q1 2025. However, it reaccelerated last quarter to 5%.
Management is actively buying back a lot of shares and pursuing new growth opportunities, especially in advertising and BNPL.
I think ads and BNPL can be big categories for $PYPL that can reaccelerate the growth to low-double-digits.
In any case, it has very consistent cash flows, and the downside from here is very limited.
Image
P/E Ratio: 18
5-Year Revenue CAGR: 11.6%
Return on Capital Employed: 5.5%
It stopped losing market share to other e-commerce players in China, and the international commerce segment is still growing really fast.
Yet, the biggest promise of $BABA is its cloud.
It's the largest cloud provider in Asia and the fourth largest in the world.
Demand for AI cloud services will skyrocket, and it's poised to capture the lion's share of the demand in Asia.
We already started to see this as its cloud segment growth accelerated from 18% to 26% YoY last quarter.
It's very attractive as a potential AI play at 18 times earnings.
Image
P/E Ratio: 28
5-Year Revenue CAGR: 52%
Return on Capital Employed: 40%
It's one of the most effective online payment gateways for emerging markets.
It enables merchants to receive payment in over 600 local payment methods.
The stock got hammered down last year because its take rates were plummeting; however, the management shifted the strategy to focus on volume growth instead to offset declining take rates.
That strategy has worked well so far as it's on its way to deliver 40-50% volume growth this year.
This growth won't slow down anytime soon, as e-commerce penetration in emerging markets is still in its infancy, and those economies are expected to grow 2 times faster than the developed markets in the next 5 years.
Given the growth potential, it could be an asymmetric opportunity at 19 times forward earnings.
Image
P/E Ratio: 19
5-Year Revenue CAGR: 57%
Return on Equity: 14%
Inter is the second-largest neo-bank in Brazil, and it's actively pursuing expansion in both Latin America and the US.
Its monetization strategy is based on loans. This leads users to keep idle money in their accounts to service debt.
They utilize idle deposits to fund loan portfolio growth, resulting in one of the lowest costs of funding in the industry.
They have also created complementary products around their core banking operations, like investment, insurance brokerage, and shopping. This opens up ample cross monetization opportunities.
The market is grossly discounting its future growth opportunities as it's valued at just 8 times projected 2027 earnings.
Image
P/E Ratio: 14
5-Year Revenue CAGR: 17%
Return on Capital Employed: 56%
It is currently experiencing three headwinds:
- Disappointing Cagrisema Phase-III trial results
- Increasing competition
- Fx headwinds
The silver lining is that all these are near certain to be temporary.
Cagrisema is performing better than Zepbound and only misses Lilly's Retatritude by 2% in terms of effectiveness. Its oral weight-loss pill performs on par with that of Lilly, but it has a slight market advantage.
Increasing competition isn't good news, but the market growth is set to offset it for the near future.
FX headwinds are near certain to be temporary as the USD will weaken once the Fed resumes cutting rates.
Given its dominant market position in diabetes and obesity markets, I think it's heavily undervalued at 14 times earnings.
Image
7. $Taiwan Semiconductor Manufacturing(TSM)$
P/E Ratio: 27
5-Year Revenue CAGR: 17%
Return on Capital Employed: 30%
It owns over 90% of the advanced chip manufacturing market and produces all the chips for Apple and Nvidia.
It effortlessly posted 30% YoY revenue growth last month, and this won't slow down anytime soon, given the AI demand.
Its yields are 30% to 40% higher than the closest competitor, Samsung, for 2nm nodes, and it's the only foundry having started the development of the 1nm process.
It looks relatively undervalued at 22 times forward earnings
Image
P/E Ratio: 23
5-Year Revenue CAGR: 8%
Return on Equity: 12%
It's one of the largest merchant acquirers and infrastructure solutions providers to banks.
Its growth has slowed down due to increasing competition in the industry recently; however, its position is still strong, and cash flows are predictable.
Its growth may accelerate as its new merchant-side solutions, Clover, accelerate in adoption.
Drastically undervalued at 9 times 2027 earnings.
Image
P/S Ratio: 0.4
Gross Margin: 20%
5-Year Revenue CAGR: 80%
Direct-to-consumer health insurer that is growing extremely fast.
It doubled the revenue last year and added over 500,000 members.
It was originally guided for a profitable 2025 but is currently suffering the same headwinds as the broader industry.
It filed for price increases in most of its marketplaces, and the management kept the 2027 EPS guidance of $2 intact.
At the current price, it's trading at just 9 times 2027 earnings.
Asymmetric opportunity given the disruptive potential of the company.
Image
10. $Dave Inc(DAVE)$
P/E Ratio: 59
5-Year Revenue CAGR: 28%
Return on Equity: 16%
Dave is one of the fastest-growing neo-banks in the US.
Instead of loans or credits, it focuses on cash advances to create the initial relationship with the customers.
This allowed it to grow extremely fast, as 60% of the US adult population lives paycheck to paycheck.
After the initial relationship, it monetizes through upsells and cross-sells.
It's profitable and still so small. It's yet to offer big loan products or credit cards.
Once it starts expanding and offering credit cards and loan products, evolving into a full-fledged digital bank, the sky is the limit.
It's worth watching at 26 times forward earnings.
Image
For whom haven't open CBA can know more from below:
🏦 Open a CBA today and enjoy privileges of up to SGD 20,000 in trading limit with 0 commission. Trade SG, HK, US stocks as well as ETFs unlimitedly!
Find out more here：
Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
