It might seem tough to find bargains in a nine-year bull market. However, plenty of stocks still look undervalued relative to their growth potential. Today, a trio of our Fool.com contributors will introduce their favorite value stocks: SINA (NASDAQ:SINA), Mylan (NASDAQ:MYL), and BB&T Corporation (NYSE:BBT).
An overlooked Chinese tech play
Leo Sun (SINA): SINA is one of China's oldest internet companies, and it owns a network of portal sites and a controlling stake in Weibo, which it spun off back in 2014. SINA generated nearly 80% of its sales from Weibo last quarter.
SINA's Weibo revenue surged 68% annually during the quarter, while its portal revenue (which includes its fintech unit) grew 8%. Its total non-GAAP revenue rose 50% annually to $537.4 million, beating estimates by over $2 million. Its GAAP revenue also grew 50% to $534.8 million. It expects its sales to climb 36%-45% for the full year.
SINA's bottom-line growth was also impressive. Its non-GAAP net income rose 26% to $66.5 million, or $0.89 per share, beating estimates by $0.20. On a GAAP basis, its net income rose 50% to $35.1 million, or $0.47 per share. SINA also announced a fresh $500 million buyback -- which is equivalent to over 10% of its current market cap.
Those numbers all seemed strong, yet SINA's stock tumbled to a new 52-week low after the earnings report, presumably due to concerns about headwinds in the small-to-medium enterprise market and investors shunning Chinese stocks amid escalating trade tensions with the US.
However, SINA's sell-off reduced its forward P/E to 14, making it cheap relative to its growth potential. Shares of SINA will likely remain volatile, but I think investors who buy this dip could be well-rewarded in the near future.
A leader in a beaten-up -- but incredibly critical -- industry
Chuck Saletta (Mylan Laboratories): 2018 has been a less-than-stellar year for several generic-drug manufacturers, with Mylan Laboratories seeing its share of the pain. Fortunately, several of Mylan's issues are self-inflicted, such as manufacturing quality control problems at one of its U.S. facilities. As a result, while Mylan's shares have been shellacked, there's good reason to believe it can recover, particularly if it delivers on the fundamentals and can restore its traditional focus on quality.
Indeed, Mylan's stock currently trades at less than seven times the company's anticipated forward earnings. Prices like that usually reflect a stagnant company or one in decline, but analysts are expecting a decent earnings growth rate above 8.5% annualized over the next five years. If Mylan simply restores its operational rigor and delivers modest growth levels, its share value today will very likely look absurdly cheap in the not too distant future.
The open question, however, is whether Mylan will truly focus on its operating fundamentals, or whether it will get distracted by its recently announced strategic review process. If Mylan gets caught up in making itself look attractive to buyout partners instead of focusing on the fundamentals, it could further rot its operational strength in a quest for short-term savings. If it fails to find a suitor and Mylan doesn't address its quality-control problems, its apparent value may turn out to be a value trap.
Boring can be beautiful
Jordan Wathen (BB&T Corporation): BB&T is a great bank priced as an OK one. It lacks the higher growth rates of its regional banking peers, and its fee-based business model means the company ranks low on the list of banks to buy as interest rates rise. Shares thus trade at about 12.5 times earnings estimates in 2018, an earnings multiple that doesn't account for its quality.
While it's true that BB&T's goal of growing the loan book at 2%-4% on an annualized basis is sleep-inducing levels of boring, it's also true that BB&T is one of the best underwriters among regional banks. It is one of the few banks that can proudly boast that it was profitable throughout the financial crisis. Firmly entrenched in growing cities in the Southeast, slow loan growth has more to do with its conservative nature than an inability to find the marginal loan to underwrite.
And while its fee-based sources of income may stand to reduce the impact of rising rates on the bank's income statement, fee income also insulates it from credit risk. In the most recent quarter, fee-based income sources tallied to about 71% of its non-interest operating expenses, enabling it to keep the lights on even when the credit cycle turns unfavorable.
Acquisitive by nature, I suspect BB&T will manage its balance sheet prudently, and put itself in position to acquire smaller institutions at attractive prices when the credit cycle eventually turns. Until then, BB&T's dividend yield of 3.2% per year handsomely rewards shareholders who are willing to exercise some patience.