In 2022, the old rules of investing have mostly gone out the window, but one thing hasn’t changed: Wall Street’s best value stocks continue to be an attractive place for investors to plunk down their money for the long term.
The S&P 500 is down roughly 10% year-to-date. War continues to rage in Ukraine and disrupt energy markets. And significant changes in interest-rate policy continue to upend investment strategies that have been profitable for several years running.
But that’s the thing about investing. If you want to get ahead, it’s important to think beyond the obvious opportunities and consider a holistic approach that will generate returns even in even challenging environments. That involves looking beyond fashionable growth investments to value stocks that might been roughed up of late but still offer long-term upside.
In hopes of finding the best value stocks for investors right now, we looked for:
- Companies with a minimum market value of about $1 billion
- Those with forward price-to-earnings (P/E) ratios below the broader market (for reference, the S&P 500’s forward P/E is currently at 18.8)
- Those with price/earnings-to-growth (PEG) ratios below 1 (PEG factors in future growth estimates, and anything under 1 is considered undervalued)
- Strong analyst support, with at least 10 Wall Street experts covering the stock and the vast majority of those issuing ratings of Buy or Strong Buy
A few of these companies have admittedly seen trouble lately, hence their sagging stock prices, but even then, their underlying businesses are sound. And considering the broader challenges to every company on Wall Street, it’s important for investors to focus on high-quality picks over the latest flashy growth narrative, regardless of recent performance.
Here are 15 of the best value stocks to buy now.
Share prices and other market data as of April 25. Analyst ratings courtesy of S&P Global Market Intelligence. Stocks are listed by analysts’ consensus recommendation, from highest score (worst) to lowest (best).
- Market value: $2.8 billion
- Dividend yield: N/A
- Forward P/E ratio: 16.8
- Analysts’ ratings: 6 Strong Buy, 1 Buy, 4 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.82 (Buy)
Even if you’re the kind of person who wouldn’t be caught dead wearing a cowboy hat in public, don’t let your personal tastes get in the way of understanding the fundamentals that make Boot Barn Holdings (BOOT, $94.71) one of the most attractive value stocks in 2022.
Shares have soared roughly 800% over the past five years. That’s in response to a top line that has soared from just under $630 million in the fiscal year ended spring 2017 to what is projected to be nearly $1.5 billion at the end of this fiscal year.
Say what you want about cattleman hats, but you can’t disparage results like that.
But growth has become harder to come by in this niche retail model. More recently, that has weighed on shares, which are down about 30% from their 52-week highs in late 2021. With the worst of COVID-19 behind us, however, and given Boot Barn’s loyal customer base, there’s every reason to expect this retailer to keep putting up big numbers – including a stunning growth outlook of more than 60% revenue expansion this fiscal year.
That might make this recent pullback a chance to get in on one of Wall Street’s best value stocks, now that BOOT’s valuation is more in line with peer specialty retail stocks despite outsized growth projections.
It’s also worth noting that, unlike down-market goods, Western wear is a decidedly luxury category, despite what many might think. Quality boots and hats can run $500 or more. And history has shown that these kinds of purchases keep churning along even amid high inflation and other consumer pressures.
- Market value: $5.1 billion
- Dividend yield: 1.4%
- Forward P/E ratio: 8.3
- Analysts’ ratings: 6 Strong Buy, 1 Buy, 4 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.82 (Buy)
The pandemic changed many behaviors and expectations, and among those were many consumers thinking hard about housewares for the first time in a few years. Since nobody could travel and we were all spending so much time in our homes and apartments, it was natural to finally pull the trigger on furniture upgrades that hadn’t seemed particularly urgent before COVID-19.
Mattress leader Tempur Sealy International (TPX, $28.70) rode that wave in a big way, watching shares rise more than four-fold from March 2020 through fall of last year. However, many investors have abandoned the stock lately on the idea that the upgrade cycle is over; indeed, TPX has lost nearly half its value since September 2021.
That has created a big opportunity for value investors. The 2013 mash-up of some of the biggest mattress brands on the planet gives this company deeply entrenched relationships with retailers. And while many folks are buying mattresses online these days, there’s one thing that TPX has that these e-commerce brands don’t: a massive hospitality business, which continues to look very strong as hotels look to an important summer travel season after the pandemic.
In fact, even though TPX stock is down more than 40% on the year, Wall Street is actually anticipating double-digit revenue growth and continued earnings improvement. While perhaps things got a bit overheated in this stock thanks to the “stay at home” trade, continued growth coupled with a more reasonable price now makes this mattress leader look like one of 2022’s best value stocks to buy right now.
- Market value: $3.7 billion
- Dividend yield: 3.3%
- Forward P/E ratio: 9.9
- Analysts’ ratings: 6 Strong Buy, 0 Buy, 4 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.80 (Buy)
When it comes to durable retail spending categories, it’s hard to find a store that is more reliable than Carter’s (CRI, $89.72). This go-to brand is focused on children’s clothing under its own nameplate, as well as under associated brands like iconic OshKosh overalls.
Kids keep growing and keep needing clothes no matter what, and upscale fashions make Carter’s stores a go-to destination for moms and grandmas everywhere.
Admittedly, the growth outlook is relatively modest here. Revenues are projected to expand by merely single digits both in 2022 and 2023. However, Carter’s is expected to squeeze plenty of blood from that stone, with earnings per share estimated to jump by 14% this fiscal year and another 11% in fiscal 2023 if current projections hold.
CRI has been investing heavily in e-commerce over the past few years, and in fact, its international segment posted an impressive growth rate of nearly 30% this last fiscal year in part because of digital successes.
OK, sure, international sales account for just 13% of total revenue. But this is exactly the kind of under-the-radar narrative that investors should look for in value stocks: outsized growth in a small business segment that will ensure strong operating results in the future, even if there’s no disruptive innovation on the horizon set to deliver instant gains.
Children’s wear is a durable spending category, and CRI remains one of the top brands in the space. With shares trading at a forward P/E of just about 10 right now, it might be worth looking at this retailer as a potential bargain stock.
- Market value: $111.7 billion
- Dividend yield: 1.5%
- Forward P/E ratio: 16.4
- Analysts’ ratings: 15 Strong Buy, 7 Buy, 7 Hold, 1 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.80 (Buy)
Big-box shop Target (TGT, $241.66), at more than $110 billion in market value, is one of the largest U.S. retailers out there. But although Target takes great pains to offer higher-quality furnishings and more fashionable apparel than its down-market competitors, this big box giant is itself being discounted in 2022 – creating an ideal opportunity for those seeking out value stocks to buy right now.
Right now, Target’s market value is slightly below its projected revenue for next year, while competitors like Costco Wholesale (COST) are trading at a premium on this metric. TGT stock is also being discounted compared with earnings, with a forward P/E of 16.4 right now compared with a reading of almost 19 for the broader S&P 500 Index.
It’s also worth noting that while COVID-19 disruptions took their toll on many retailers, Target is actually riding a broader tailwind for its business thanks to the fact that is has adapted to the “omnichannel” approach of a digital age. Total sales are up almost $30 billion since 2019 thanks to a robust e-commerce presence, curbside pickup and an agile approach to compete in a digital age.
The dividend yield might not burn down the house – at 1.5%, it’s better than the broader S&P 500 but worse than 10-year T-note. But Target is a Dividend Aristocrat that has strung together half a century’s worth of uninterrupted payout growth – and with annual payouts just totaling $3.60 per share and earnings set to approach $16 per share next fiscal year, there’s more than enough headroom for increased dividends down the road.
And for those concerned with environmental, social and governance (ESG) traits, note that Target also has earned a place among our Kiplinger ESG 20.
- Market value: $26.3 billion
- Dividend yield: 1.2%
- Forward P/E ratio: 4.5
- Analysts’ ratings: 11 Strong Buy, 4 Buy, 6 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.76 (Buy)
A $26 billion homebuilding company, D.R. Horton (DHI, $74.19) has a pretty easy-to-understand business. It acquires land, builds residential homes on the sites, then sells the finished houses for a hefty profit.
It operates under the D.R. Horton brand, as well as Express Homes, Emerald Homes and Freedom Homes. It also offers mortgage financing and related services to help put buyers in their new homes.
If you own a home or are shopping for a home right now, chances are you’re attuned to the ever-rising values in most markets. But to give newcomers an example, home prices in March surged 15% year-over-year to set yet another record, proving this red-hot sector is far from cooling off.
DHI, however, has rolled back as investors have gone “risk off” in 2022, with shares now off about 35% from 52-week highs set in November. Part of the reason is because folks are afraid that higher interest rates could result in higher mortgage costs and thus scare off potential homebuyers.
At least so far, that has not been the case. No small wonder. Consider that the National Association of Realtors estimated that in March the inventory of homes actively for sale on a typical day in March decreased by 19% compared with the prior year. There is simply not enough supply for the buyers that are out there, and interest rates aren’t rising enough to make enough of those buyers reconsider.
That adds up to a compelling story for DHI. Couple that with a bargain valuation, including a forward price-to-earnings ratio that is below 5 right now, and it’s worth considering staking your claim to one of today’s best value stocks in the housing space.
- Market value: $7.3 billion
- Dividend yield: 2.5%
- Forward P/E ratio: 8.6
- Analysts’ ratings: 10 Strong Buy, 3 Buy, 5 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.72 (Buy)
Chemicals company Huntsman (HUN, $34.19) produces products worldwide including polyurethanes, dyes, epoxies and other materials. It’s not a particularly glamorous business, making these raw materials for end-users to craft their own finished goods. However, Huntsman’s chemical operations are incredibly reliable, and they’re seeing strong demand across the board as the global economy recovers in the wake of the pandemic.
As proof: A few months ago, Huntsman posted Street-beating sales and earnings for the fourth quarter of 2021, and it provided strong guidance for 2022. That’s not just because of improving demand broadly, but also because of higher prices it can command as a result of the current inflationary environment.
Thanks in part to these strong results, HUN also has been blessed by a Standard & Poor’s upgrade to its credit rating in April that will help the chemicals company access financing at better rates going forward.
Value investors will be interested to learn that Huntsman is incredibly committed to its shareholders. It recently doubled its stock buyback program to $2 billion in the wake of recent success, and it has already bought up more than $100 million under that authorization. It also recently increased its dividend by 13%, to 21.25 cents per quarter – that’s 70% from the 12.5-cent quarterly payout it provided as recently as late 2017.
And with payouts at less than 20% of next year’s earnings, there is ample upside for future dividend increases, too.
- Market value: $29.1 billion
- Dividend yield: 3.1%
- Forward P/E ratio: 14.4
- Analysts’ ratings: 7 Strong Buy, 4 Buy, 3 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.71 (Buy)
Although it got its start as a specialty glass company was back in 1851, Corning (GLW, $34.42) has a long history of high-tech partnerships – from working with Thomas Edison on his early lightbulbs to leading the charge on cathode ray tubes that powered the first generation of televisions to modern fiber optic cable and touch-screen displays.
In fact, its chemically strengthened Gorilla Glass is currently the gold standard for mobile devices. It is designed to be thin, responsive and damage-resistant – all must-have characteristics for phones and tablets.
Corning has been a slow-and-steady performer compared with some of the flashier names in technology. But there is definitely still growth here. GLW produced an outsized spurt in 2021, with revenues up nearly 25% year-over-year. Looking forward, estimates are still for mid- to high-single-digit sales improvement over the next couple years. And promisingly, Corning has largely sidestepped most of the supply-chain issues plaguing many manufacturers; indeed, CEO Wendell Weeks said earlier this year that its biggest problem wasn’t supplies or labor, but capacity to meet high demand!
On top of that, GLW offers a decent dividend north of 3%. That dividend is growing, too, up to 27 cents quarterly at present compared with 10 cents per quarter back in late 2014. And with annual earnings per share of more than $2.60 projected next fiscal year, that dividend isn’t just sustainable but also ripe for future increases down the road.
When looking for the best value stocks – those that can perform over the long run – a stock like Corning is a great example of taking an alternative approach to fashionable trends to avoid some of the volatility. Nobody thinks of this glass company first when plotting investments in tech, and that allows for moments like this when shares are more reasonably priced than some other assets out there.
- Market value: $173.7 billion
- Dividend yield: 2.2%
- Forward P/E ratio: 10.6
- Analysts’ ratings: 13 Strong Buy, 8 Buy, 5 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.69 (Buy)
Among financial stocks, the $180 billion financial powerhouse Wells Fargo (WFC, $45.83) in many ways was, for a time, in a class by itself. However, the company has piled up a number of black marks on its corporate record in recent years that have caused many investors to think twice about putting their money behind WFC stock.
One of the biggest challenges started in late 2016, with news that some Wells employees were opening checking and savings accounts for clients without their consent. There was also word that Wells was misleading businesses on corporate credit card fees, followed by a 2018 move by the Federal Reserve announcing it would restrict the bank in response to “widespread consumer abuses and compliance breakdowns.”
Understandably, some folks have abandoned WFC stock in recent years – including even Warren Buffett, who exited almost all of his stake last year. And that’s not without cause. But as with so many things, the race for the exit has created a buying opportunity for value-minded investors.
WFC stock currently trades for a price-to-book ratio of just 1.1, compared with closer to 1.3 for Bank of America (BAC) and 1.5 for JPMorgan Chase (JPM), and 1.7 for “super-regional” U.S. Bancorp (USB). So while Wells remains one of the biggest banks in the U.S., it’s still treated as an also-ran compared to large peers.
But with interest rates on the rise, creating a tailwind for most lenders, it’s worth considering whether the negativity around past transgressions has turned Wells Fargo into one of the banking industry’s best value stocks to buy.
- Market value: $118.8 billion
- Dividend yield: 1.6%
- Forward P/E ratio: 8.9
- Analysts’ ratings: 14 Strong Buy, 9 Buy, 3 Hold, 1 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.67 (Buy)
Everyone who has filled up their car with a tank of gas recently knows all too well how inflationary pressures have gripped the energy sector in a big way over the last year or so. And as a result, many oil and gas stocks have seen strong performance as well.
With crude oil prices at around $100 per barrel presently, that has created continued tailwinds for Big Oil names such as ConocoPhillips (COP, $91.66). It’s not the biggest firm in the oil patch, but it’s still a major player at nearly $120 billion in market value and a global energy business that explores, develops and produces oil and natural gas worldwide. And unlike the big integrated energy giants, COP mostly operates in “upstream” operations (exploration and production), meaning it’s uniquely positioned to make the most of the current environment.
Case in point: As a result of inflationary pressures across all energy commodities these days, the company is plotting revenue growth of more than 25% this fiscal year.
An investment in ConocoPhillips certainly carries risks, insofar that a significant rollback in oil prices would likely disrupt the stock the same way we saw rising prices create better performance. However, COP is making big structural moves lately that should ensure shareholder value for many years to come.
Specifically, COP plans to return 30% of operating cash to shareholders with a predicted outlay of $65 billion back to shareholders from 2022 through 2031. That follows a $1 billion boost to its stock buybacks last year.
These are significant figures that should make any value investor a believer in this stock.
- Market value: $57.9 billion
- Dividend yield: N/A
- Forward P/E ratio: 6.0
- Analysts’ ratings: 12 Strong Buy, 7 Buy, 4 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.65 (Buy)
Traditional automakers have struggled for a host of reasons in recent years.
For starters, younger generations of Americans simply aren’t as concerned with driving or car ownership. Then there’s the electric vehicle revolution that has put many legacy brands behind the 8-ball when it comes to innovation. And to top it all off, major disruptions to semiconductor supply chains have created bottlenecks, preventing car manufacturers from tapping into pent-up demand.
However, these circumstances have also scared off many investors who do not see the underlying value in car stocks such as General Motors (GM, $39.82).
GM currently trades for just six times earnings estimates – more than three times lower than the typical S&P 500 stock right now. Furthermore, it trades for a slight discount to book value and at half next year’s projected revenue. These kind of metrics are a value investor’s dream.
To be clear, GM’s bargain price isn’t because of, say, disturbing growth projections that warrant this discount. Rather, GM is projected to see an impressive 23% growth in the top line this year. And while earnings are set to take a hit in fiscal 2022, they are forecast to make up all the lost ground and then some in fiscal 2023.
The automotive market assuredly is full of risk and uncertainty. However, GM has a long history and strong brand recognition that should serve it well, especially as the company shows that it’s willing to be flexible.
At these prices, GM stock could be one of the sneakiest value stocks to buy now.
- Market value: $6.3 billion
- Dividend yield: N/A
- Forward P/E ratio: 13.6
- Analysts’ ratings: 8 Strong Buy, 2 Buy, 3 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.62 (Buy)
Skechers U.S.A. (SKX, $39.24) is a roughly $6 billion footwear company that continues to connect with consumers and build on its already impressive brand.
But what really makes Sketchers one of the best value stocks to buy now is its direct sales operations that continue to boost margins and drive real results for shareholders. In February, for instance, Skechers reported that its direct-to-consumer segment posted more than 30% year-over-year gains during the fourth quarter.
And looking forward, the brand continues to explore new products via its “comfort technology” and predicts yet another record year in 2022 as it rides growth trends even higher.
SKX stock has struggled over the past year. Shares are off by about 25% over the past 12 months as some investors have questioned whether recent growth trends can continue. Well, the pros are projecting low-double-digit revenue growth in each of the next two years – and similar expansion on the bottom line next year before a 24% explosion in profits in 2023.
Meanwhile, Skechers is helping its own cause, authorizing a $500 million stock buyback program in February to help prop up its shares.
Despite all this, SKX stock still trades for a slight discount to annual sales and a forward price-to-earnings ratio of about 13 right now – significantly lower than both the S&P 500 as well as other top consumer discretionary stocks. With continued growth ahead and continued investment in the high margin direct-to-consumer arm of its business, there’s good reason to expect Skechers has what it takes to succeed going forward.
- Market value: $132.5 billion
- Dividend yield: 1.6%
- Forward P/E ratio: 14.8
- Analysts’ ratings: 18 Strong Buy, 4 Buy, 7 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.62 (Buy)
While Home Depot (HD) might be the go-to name in home improvement, investors would be wise to not sell short its competitor Lowe’s (LOW, $200.38). Consider that while Home Depot has roughly 2,300 locations in the U.S., Lowe’s commands roughly 2,000 locations of its own. However, HD is valued at $315 billion while Lowe’s market capitalization is almost a third of that, at $130 billion or so.
And as long as we’re comparing, Lowe’s boasts a forward price-to-earnings ratio of less than 15 and a price-to-sales of about 1.4 while HD has a forward price-to-earnings ratio of about 19 and a price-to-sales ratio of 2.1.
In other words, Home Depot might be the larger DIY chain, but that’s in part because investors are paying a significant premium for shares.
And this discount comes despite the fact that Lowe’s has delivered better returns across most timeframes, including a 159% total return (price plus dividends) over the past five years versus 124% for HD. Helping that total return is one of the most consistent dividends on Wall Street – Lowe’s is another Dividend Aristocrat, having raised its payout annually for 59 consecutive years.
If you’re looking for value stock picks, Lowe’s is the better buy among DIYs.
- Market value: $5.0 billion
- Dividend yield: 1.7%
- Forward P/E ratio: 9.5
- Analysts’ ratings: 4 Strong Buy, 4 Buy, 0 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.50 (Strong Buy)
Air Lease (AL, $43.76) is an aircraft leasing company concerned with the purchase and leasing of aircraft worldwide. Right now, it owns just shy of 400 planes and is benefiting from a resurgence in air travel now that the coronavirus pandemic is on the wane.
The fundamentals of Air Lease are looking up thanks to improving air travel trends, as evidenced by a projection of 15% revenue growth this fiscal year and then roughly 18% growth the following year.
But despite this tailwind (pardon the pun), AL stock is still reasonably priced with a forward price-to-earnings ratio of about 9 right now. That’s less than half the S&P 500 average at present.
In February, Air Lease said that its lease utilization rate for both 2021’s fourth quarter and full year was an amazing 99.8%. There is no better metric of success for a company like this, proving that its existing resources are in high demand. Additionally, the triple-net lease model of Air Lease requires that the users of its planes pay for the taxes, insurance, and maintenance regardless of whether those planes are grounded or flying. All of this means a higher likelihood that money will continue to roll in for the foreseeable future.
With COVID-19 on the wane and an uptrend in air travel trends this year, the stage is set for AL stock to finally take off after years of stalling. But the time to buy should be soon, while it’s still one of Wall Street’s top value stocks.
- Market value: $16.4 billion
- Dividend yield: 0.9%
- Forward P/E ratio: 13.2
- Analysts’ ratings: 10 Strong Buy, 7 Buy, 0 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.41 (Strong Buy)
Signature Bank (SBNY, $261.06), a roughly $16 billion regional bank stock, is riding the tailwind that has benefited most financial firms in the last several months: namely, higher interest rates that have lifted margins on loans.
Signature boasts about $120 billion in assets under management, mostly in major metro areas including New York, Charlotte and San Francisco. The company primarily serves local consumers and businesses through conventional offerings including checking accounts, real estate loans and lines of credit. But beyond that, SBNY also is a major player in high-growth areas like cryptocurrency trading via its Signet platform, as well as slow-and-steady business lines such as insurance that help ensure strong long-term performance.
Thanks to the uptrend in operations lately, SBNY is projecting big-time increases in its operating metrics, including a nearly 45% jump in revenue this year. The bottom line is expected to expand by just as much.
Many segments of Wall Street that can wax and wane, and financials are no exception. But Signature Bank’s wide and sustainable footprint will serve it well in the current rising-rate environment. It’s not as large as other diversified financials, but it’s trading at levels that put it among the top value stocks to buy right now.
- Market value: $78.3 billion
- Dividend yield: 0.6%
- Forward P/E ratio: 6.1
- Analysts’ ratings: 26 Strong Buy, 7 Buy, 4 Hold, 0 Sell, 0 Strong Sell
- Analysts’ consensus recommendation: 1.41 (Strong Buy)
Data storage leader Micron Technology (MU, $70.12) is a company that has deep roots in the modern digital economy. Founded back in 1978 – in Idaho, of all places – Micron carved out a niche in semiconductor design that has ultimately kept it at the cutting edge of the tech sector for more than three decades.
Nowadays, Micron specializes in data storage technologies, including for graphics and servers, as well as mobile-focused solutions known as dynamic random-access memory (DRAM). And it’s this sustained growth in the memory market that looks to provide the biggest tailwind for MU stock in the years to come.
Just look at the numbers. Micron is projected to enjoy more than 20% revenue growth in both fiscal 2022 (the current year for MU) as well as 2023. And that will more than filter down to the bottom line. The pros are looking for 50%-plus growth in earnings per share this fiscal year, then another 30% growth in 2023.
Yes, semiconductor stocks are up against the ropes right now. And yes, there are perhaps more interesting stocks in the space than MU. However, with a forward price-to-earnings ratio of just over 7 right now and strong growth projections for the next two years, it might be worth looking to this unsung chip play at its current bargain valuation.
Source: kiplinger.com