Here are 10 high-quality undervalued stocks I am watching now
The market is near all-time highs, yet there are still attractive opportunities.
Here are 10 high-quality undervalued stocks I am watching now: 🧵
- 5 Year Revenue CAGR: 10%
- Return on Investment: 12%
- Forward P/E: 19
The healthcare industry as a whole mispredicted the activity rates and medical inflation this year, resulting in reduced operating margins.
This effect was even stronger for UNH as they absorbed over 700,000 customers who bounced from other providers at the beginning of the year.
Yet, they are poised to overcome these headwinds:
- They are raising the prices for 2026.
- Management is implementing strict cost control.
Superinvestors like Warren Buffett, David Tepper, and Chris Davis bought the stock and appreciate by 41% from its lows.
Yet, it's still down over 30% this year and trading at just 14 times earnings.
A bar chart displaying UnitedHealth Group\'s revenue in millions from 2019 to 2023. Bars show revenue amounts: 242,198 in 2019, 257,608 in 2020, 322,128 in 2021, 402,978 in 2022, and 421,938 in 2023. Smaller bars indicate net income for each year. Text overlays include revenue and net income figures, total percentage changes, and compound annual growth rates. A watermark reads "Powered by bigr" at the bottom right.
2.
- 5 Year Revenue CAGR: 8%
- Return on Investment: 11%
- Forward P/E: 12
PayPal is struggling to deliver the high growth that investors expect from it, and I don't think this will change in the near future.
It's the largest online payment network in the world, active in all continents and regions, with over 35 million merchant accounts.
The network is basically saturated.
However, it's still growing the total payment volume at a healthy rate, buying back a lot of shares, and expanding to new markets like digital advertising.
Even if we assume a very low 7% annual growth rate for the next 10 years, the fair value we get is at least double the current price.
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3. $Shift4 Payments, Inc.(FOUR)$
- 5 Year Revenue CAGR: 36%
- Return on Equity: 18%
- Forward P/E: 13
It's the best integrated payments and business management terminal in the market.
It grew very fast in the last 5 years, but the stock got depressed after the departure of its founder.
However, Wall Street still expects over 20% revenue growth next year, but the stock is trading at 13 times next year's earnings.
The founder recently bought shares for the first time since he left the CEO role.
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- 5 Year Revenue CAGR: 28%
- Return on Equity: 15%
- Forward P/E: 25
Trade Desk is the market in programmatic advertising outside the walled gardens, such as the Meta and Google networks.
They have been experiencing headwinds for a while, first due to the slow adoption of their new platform and now due to the competition from giants like Amazon.
However, even though their position is strong, especially in connected TV, customers are seeing real return on investment.
The stock is trading at just 25 times next year's earnings.
It can easily double from here in the next 5 years, assuming just 15% annual revenue growth, 30% net margin, and 25 times exit multiple.
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- 5 Year Revenue CAGR: 12%
- Return on Capital: 27%
- Forward P/E: 15
Adobe has a healthy growth rate, yet the market is concerned that it may get disrupted by AI.
I don't think this will happen anytime soon.
Pure AI tools are currently far from being able to provide the granularity of Adobe's tools, and Adobe is already generating most of its revenue from customers who need higher-level control.
Even if AI reaches that point in the future, high-level is the best-positioned company to dominate that market, as it can leverage its already existing user base.
I think it's cheap at 15 times forward earnings.
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- 5 Year Revenue CAGR: 7%
- Return on Equity: 13%
- Forward P/E: 12
It's the leading merchant acquirer in the US.
Though the growth has been sluggish over the past few years, its new integrated payment and business management terminal, Clover, is growing really fast at a 30% annual rate. If this growth continues, it can lead to reacceleration in the broader business.
It also dominates the banking software market in the US, and its revenue retention in this segment is over 99%.
Slow growth raises suspicions, but I think 12 times forward earnings is already cheap enough to mitigate growth-related risks.
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- 5 Year Revenue CAGR: 17%
- Return on Capital: 42%
- Forward P/E: 14
It's the leading player in the global insulin and weight-loss drugs market.
It plummeted this year due to disappointing trial results from its next-gen weight loss drug, Cagrisema, and competition from Eli Lilly.
However, its oral Wegovy proved to be more effective than Eli Lilly's drug, and it'll be launched earlier.
Danish Krone is also gaining value against the US dollar, another tailwind for NVO.
Given that the weight-loss drugs market will keep growing at a fast rate in the next 10 years, I think it's cheap at 14 times forward earnings, given the growth potential ahead.
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- 5 Year Revenue CAGR: 13%
- Return on Equity: 11%
- Forward P/E: 20
It's the leading customer management software business in the world.
The growth has been slowing down for a while due to competition from niche rivals and saturation of the US market.
However, they have a strong cloud business that they can leverage to create best-in-class enterprise AI agents, a strategy they call "Agentforce."
It's still questionable whether this strategy will boost growth, but even if they can achieve growing low-double digits in the next 5 years, the current price will be justified.
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9. $GRG.L
- 5 Year Revenue CAGR: 10%
- Return on Equity: 27%
- Forward P/E: 11
Greggs is the leading bakery chain in the UK.
It recently suffered from extreme weather conditions last year, which resulted in reduced foot traffic.
Yet, all the business metrics are going in the right direction:
It's growing double digits, planning to grow the store count from 2,600 now to 3,600 by 2034, and it's generating very high return on equity.
I think 11 times forward earnings is extremely cheap for such a healthy-growing, market-leading business.
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10. INPST
- 5 Year Revenue CAGR: 36%
- Return on Equity: 40%
- Forward P/E: 12
InPost is one of my highest conviction picks right now.
It's the leading parcel delivery network in Europe, and it's rapidly expanding in the UK.
Its acquisition of Yodel, a UK logistics company, was stopped early this year, leading to a decline in stock price.
That issue is solved now, but the competition from its biggest customer in Poland, Allegro, keeps the stock under pressure.
Even if it loses all the Allegro revenue, it'll be at most 10% hit to the top-line, which will be compensated easily by rapid growth in the UK.
It recently announced a partnership with the UK Post Office to put parcel lockers outside of the branches. If this agreement expands, it can add more than 15,000 lockers in the UK in no time.
I think 12 times forward earnings is extremely undervalued for such bright prospects.
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