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2 Cheap Growth Stocks to Buy for 2022

By David Jagielski – Jan 1, 2022 at 11:15AM

Key Points

  • Fulgent has been delivering fantastic numbers as a result of its COVID-19 tests, and this may continue.
  • Inflation may not be deterring consumers, which is great news for a logistics business like FedEx.

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These stocks are both trading at less than 15 times their earnings.

Valuation measures like the price-to-earnings (P/E) ratio can be effective tools for investors to use in assessing stocks and comparing their relative attractiveness. Currently, the S&P 500's P/E ratio stands at more than 30, which is steep compared to years past when it was far lower. High-priced investments can be vulnerable to a correction.

One way to protect your portfolio in the event of a market crash is to focus on solid, value-oriented buys. Two stocks that trade at incredibly low P/E ratios of less than 15 are Fulgent Genetics (FLGT 0.80%) and FedEx (FDX 0.11%). Here's why you'll want to consider adding them to your portfolio today.

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Image source: Getty Images.

1. Fulgent Genetics

Testing company Fulgent Genetics trades at just five times its trailing earnings. And when looking to the year ahead, it's trading at a forward P/E (which is based on analysts' estimates) that's only slightly higher at less than seven. Even with a share-price gain north of 90% in 2021 -- far exceeding the S&P 500's 27% rise -- it has still managed to remain a relatively cheap buy. 

Fulgent has seen this impressive gain thanks to sales and profits that have been through the roof. For the nine months ended Sept. 30, 2021, the company achieved sales of $740.9 million, nearly six times what it reported during the prior-year period. Net income of $403 million was more than eight times its year-ago profit.

Those stellar results are due to strong demand for its COVID-19 tests, and so its success in 2022 will depend on the state of the pandemic. With omicron wreaking havoc and threatening reopenings, it's clear the world isn't out of the woods just yet. Fulgent confirmed in December that its tests could detect the new variant. With possibly more variants to come, the demand for testing may remain strong in 2022.

Fulgent isn't a risk-free buy, given that a lot will depend on COVID-19, but at its relatively low valuation, the potential rewards may outweigh the risks for this healthcare stock

2. FedEx

Shipping service FedEx hasn't had as good a year as Fulgent; its shares were flat in 2021. But with a P/E of only 14, it's a cheap buy, especially when you compare it to rival United Parcel Service, which trades at double that level with a P/E of just under 29. And on a forward basis, there continues to be a wide gap with FedEx's stock trading at 12 times its future earnings vs. 18 for UPS.

Investors may be worried about logistics businesses in 2022, especially with inflation on the rise and consumers potentially tightening their belts. However, credit card company Mastercard released data last month showing that is not the case -- at least, not yet. During the holiday season (which covers the start of November through Christmas), spending was up 8.5% from a year ago and e-commerce sales rose 11%. Compared to 2019, all retail sales were up by 10.7% and e-commerce soared more than 61%. The data is a bit of a surprise given that inflation in the U.S. for 2021 was up to 6.8% -- the highest it has been since 1982.

Although these trends may not persist in unison for long, the data is encouraging. An uptick in shopping, especially online, is great news for FedEx. The logistics company has reported revenue of $23.5 billion for the period ended Nov. 30, 2021, amounting to a 14% year-over-year increase. MasterCard's data suggest that the growth isn't coming to an end anytime soon.

David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns and recommends Apple, FedEx, Fulgent Genetics, Inc., and Mastercard. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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