Investors should be ready to pay a premium for quality stocks. That's not to say, however, that a quality stock is always going to be priced at a premium. Every now and then the market makes a temporary mistake.
With that as the backdrop, here's a look at three wildly undervalued stocks worth stepping into while they're still crazy cheap. In no certain order ...
JPMorgan Chase
Trailing-12-month P/E: 9.95
Forward-looking P/E: 13.2
In theory, a company's size shouldn't matter. Investment opportunities are supposed to be relative. A smaller company may not be capable of producing the sort of profits a larger company can, but smaller companies issue fewer shares held by fewer investors.
In reality though, there's an advantage to being big. A larger company has more financial muscle to flex, whether that means more marketing, better lobbyists, or the option of acquiring smaller competitors that expand their revenue-generating potential.
JPMorgan Chase (JPM -0.15%) is the country's biggest bank, boasting $3.2 trillion worth of assets at the end of the third quarter. The next-biggest bank is Bank of America, but it's a distant second. Bank of America is sitting on a much more modest asset base of $2.4 trillion. Ergo, JPMorgan has much more profit to work with in its effort to maintain its size-based edge -- about 50% more profit through the first nine months of 2021. That leaves JPMorgan with more options than any other megabank in the business.
The kicker: While this pace of growth is apt to cool off in the near future, Chase has quadrupled its quarterly dividend payment over the course of the past decade, sending a clear message that it's serious about sharing in its success right here, and right now. The recent dividend yield of 2.5% itself is also quite healthy.
Image source:Getty Images.
General Motors
Trailing-12-month P/E: 7.6
Forward-looking P/E: 8.9
General Motors (GM 0.95%) isn't a company that needs much in the way of an introduction. It's one of old Detroit's oldest carmakers, even if very few cars are actually made in Detroit these days. Its brands include Chevrolet, Cadillac, Buick, and GMC. Simply put, GM is a household name.
Being a household name didn't help much during the Great Recession, when the company filed for bankruptcy protection and reorganized itself. The company re-entered the public markets in late 2010 and its new stock moved mostly sideways until early 2020, when the market's pandemic-prompted sell-off torpedoed it.
In many regards, though, that steep sell-off may have also served as a capitulation at the same time the automobile industry went through a major evolution. That's the normalization of electric vehicles (EVs), which now finally has enough social, political, and infrastructure support to make it a viable business. General Motors has been moving in this direction for years anyway, but plans unveiled in 2020 to be making 30 different models of EVs by 2025 couldn't have been announced at a more opportune time. The stock is now up more than 200% from its March 2020 low, riding a wave of electric vehicle euphoria.
Even so, priced at less than 9 times its trailing and projected per-share profits, the market has yet to fully price in its potential as an EV name. The U.S. Energy Information Administration forecasts that the world's roughly 10 million electric vehicles on the roads now will swell to 685 million EVs by 2050. They won't all be Teslas.
Synchrony Financial
Trailing-12-month P/E: 6.5
Forward-looking P/E: 7.9
Finally, add Synchrony Financial (SYF -2.09%) to your list of crazy cheap stocks you can buy today.
Unlike GM, Synchrony isn't a household name. There's a good chance, however, you or someone in your household benefits from the company's services. See, Synchrony Financial is the behind-the-scenes lender for hundreds of retailers that issue their own credit cards or offer installment loans on bigger purchases. It also offers savings accounts and certificates of deposit, although credit is the crux of its business.
And business is good, as it usually is. Purchase volume was up 16% year over year during the third quarter, reaching $41.9 billion. And, its loan portfolio grew 2% to $79.8 billion during the same three-month stretch. Operating per-share earnings came in at $1.67 for Q3, well up from the COVID-crimped bottom line of $0.52 per share reported for the comparable quarter a year earlier. These figures further rekindle the mostly steady growth trend that was in place before the pandemic rattled the world in 2020.
There's no reason to think the future will look much different than the recent past either. In fact, it may look even better. With interest rates poised to rise at the same time consumers are earning more because the global economy is humming again, Synchrony is entering a proverbial perfect storm. The Federal Reserve reports U.S. consumers have racked up more net debt every quarter of this year so far, ending October with record-breaking obligations of $4.38 trillion. Connect the dots.
