Everyone wants the most bang for their buck. But sometimes it's hard to find good deals on growth stocks because their valuations are already so astronomical. That's where value stocks come into play -- these companies trade at relatively low prices relative to their cash flow and growth potential, making them solid bets for investors who want to minimize risk and maximize returns.
Here are two top stocks trading at bargain prices today that could make you richer in the years to come.
The first pick is Hasbro (HAS +2.87%), a toy company with a robust pipeline poised to bounce back from the coronavirus pandemic. The second pick is Walmart (WMT 0.52%), a massive grocery chain in the midst of a convincing pivot to online retail.
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Hasbro
Hasbro is one of the biggest toy manufacturers in the world, known for board games, interactive software, and branded children's products. The company has had a rough time during the coronavirus pandemic, with lockdowns hurting its supply chain in China and closing the retailers that sell its toys. These challenges have sent Hasbro's stock down 26% year to date (through Wednesday's close), but the toymaker looks poised to recover due to its solid pipeline and the reopening of the economy.
Hasbro reported second-quarter earnings on July 27, and the results were (unsurprisingly) weak. Pro forma net revenue fell by 29% to $860 million because of store closures and lower retail inventories due to COVID-19. But Hasbro's game business, which includes Jenga, Connect 4, and Battleship, was unexpectedly resilient, with sales jumping 11% amid strong demand for stay-at-home entertainment.
With the economy reopening, Hasbro is set for much better performance in the second half of 2020. According to management, fewer than 10% of Hasbro's retail locations are closed globally, and Chinese supply chains have largely recovered from the impacts of the virus. The reopening is coming just in time for the crucial holiday season, which can have an outsized revenue contribution. Hasbro also has a pipeline of 60 movie projects that can help the company bounce back from these challenging times.
Right now, Hasbro is valued at a forward earnings multiple of less than 24, which is below the market average of 29. The company also returns cash to shareholders with a dividend currently yielding 3.5% that it has increased for 17 years in a row.
Walmart
Known for its ubiquitous big-box stores, Walmart is the biggest company in the world by revenue, at $542 billion over the past four quarters. Shares have already jumped 11% year to date as of Wednesday's close, and the company is on track for continued growth because of its massive expansion into e-commerce. The coronavirus pandemic has driven unprecedented interest in online shopping, especially for home necessities like food and groceries. And according to research from Salesforce, some of these changes may be permanent -- even after the pandemic is over.
Walmart is poised to benefit from this megatrend because of its large physical network of stores, which allows for more seamless same-day delivery of perishable items compared to rivals like Amazon.
Walmart has over 6,100 pickup and delivery locations globally and already launched next-day delivery to 75% of the entire U.S. population. The company is also working on an "Amazon killer" subscription service called Walmart Plus that will further leverage its logistics advantage to offer same-day delivery, discounts, and other perks. The $98-per-year platform is expected to go live this year.
The company reported second-quarter earnings this week, and the results are impressive in this tough economic environment. Total revenue jumped 5.6%, and U.S. e-commerce sales jumped by 97%. The new Walmart Plus service will ensure continued growth in this important segment when it goes live.
Walmart has a forward earnings multiple of 26, which is below the market average of 29. And it has grown its dividend, which currently yields 1.6%, for 47 years in a row.
