With the stock market floating around all-time highs these days, it can be difficult to find well-valued investments, especially ones with growth potential. But a couple of cheap buys that look great over the long term and that are worth considering today are Cigna (CI 2.92%) and Qualcomm (QCOM 0.52%).
Because Cigna calls the healthcare sector "home" and Qualcomm operates in various areas of tech, these stocks can help you diversify your portfolio while tapping into some promising opportunities in the near future. And trading at low multiples of earnings, these investments won't cost you much of a premium.
Health insurance company Cigna may not be your typical growth stock. While its business is safe and diversified with sales in 30 countries serving 185 million customers, what makes it an appealing investment right now is the potential that it gained from the acquisition of telehealth company MDLive.
MDLive will be part of its Evernorth business, which focuses on health services. Telehealth is the sector to be in; analysts from Research and Markets project that the industry will be worth nearly $192 billion in 2025 -- up from $38.7 billion last year. While the pandemic made telehealth visits popular, investors shouldn't expect them to end, as patients have gotten used to the convenience of not having to make in-person trips to the doctor's office. And incorporating a telehealth company as part of a larger healthcare business can enable Cigna to offer more diversified and comprehensive options to its customers, paving the way for significant long-term growth.
The company's top line grew by 4.4% last year to $160.6 billion, and Cigna is anticipating more growth ahead in 2021. This year, it projects adjusted revenue will be $166 billion or better (which is an upgrade from its previous forecast by $1 billion). And although that may not seem like a terribly high amount of growth, it's a whole lot more difficult growing a $160 billion business than it is a company that is still in its early-growth stages. And over the long haul, the numbers could get bigger as Cigna further integrates telehealth into its offerings.
Today, shares of Cigna trade at a forward price-to-earnings (P/E) multiple of about 13. That's cheap given that industry giants Johnson & Johnson and UnitedHealth Group trade at 17 and 21 times their future earnings, respectively.
Qualcomm is in a terrific position to benefit in the near term. The chipmaker's products are used in many devices, including those that utilize 5G. And demand for those products is through the roof.
When Qualcomm released its second-quarter results on April 28, revenue of $7.9 billion for the period ending March 28 rose by a whopping 52% year over year. And the company is generating fantastic numbers across all segments and sectors it serves. Its handsets segment, which makes up the bulk of its top line, grew at a rate of 53%. But the most growth came from Internet of Things (IoT), which describes how sensors and other technologies help connect physical objects to the internet. That segment was up 71%. And although the automotive sector represents a small piece of equipment revenue for Qualcomm at $240 million, it also grew by 40%. Next quarter, the company anticipates that revenue will be similar, falling within a range of $7.1 billion to $7.9 billion. That would again put it at a 50% growth rate from a year ago, when revenue was $4.9 billion.
The widespread demand for computer chips across many industries is one of the reasons why Qualcomm makes for a solid buy. It's among the industry leaders, and although its shares are up 61% over the past year (the S&P 500 has risen by 42%), the stock could still climb higher. With a forward P/E of 17, it's a relatively cheap multiple to pay for a tech stock. The average holding in the Technology Select Sector SPDR Fund trades at more than 33 times its earnings.
With plenty of growth on the way for Qualcomm, investors shouldn't hold out hope for a dip in price, as it looks like a bargain right now.