The stock market has started to recover from a painful 2022, but many of yesteryear's high-priced market darlings are still trading far below their two-year peaks. In fact, some of them look downright undervalued by traditional metrics such as price to earnings (P/E) and price to free cash flow (P/FCF) ratios. You know, those sky-high numbers that growth investors just tend to accept as long as the company keeps delivering that sweet, sweet sales growth.
In this market, it's like we're at a garage sale near the intersection of Wall Street and Silicon Valley -- a virtual Sand Hill Road, if you will. Amid that clutter, we might just find some valuable items that have been discarded for all the wrong reasons. Two such potential treasures are RingCentral (RNG 0.38%) and Alphabet (GOOG -1.10%) (GOOGL -1.23%). The cloud-based communications veteran and Google's parent company have been through the wringer but now seem poised for wealth-building comebacks.
Dial up a low-priced deal on RingCentral
At that virtual garage sale, you stumble upon an old rotary phone. It's a bit dusty, maybe even a bit rusty, but you see potential. That's kind of like RingCentral right now. Sure, it's been a bit roughed up by the market recently, but this digital communications expert could be just the connection your portfolio needs.
RingCentral is like the old-school switchboard operator of the digital age. It connects businesses with cloud-based voice, video, team messaging, and even contact center solutions. It offers a robust portfolio of communication tools, from video conferencing and team messaging to call center services and even customer service chatbots powered by artificial intelligence (AI).
And let's not forget about its integrations. RingCentral plays nice with a whole host of other business applications. Microsoft 365? Check. Google Workspace? You bet. Salesforce? Absolutely. This team player gets along with everybody, which lets RingCentral ride many companies' coattails on inspiring long-term growth trajectories.
But here's the kicker: despite its impressive capabilities and friendly demeanor, RingCentral has found itself in the bargain bin. As of the end of May 2023, the stock is trading at $34 per share, 92% below the all-time highs of early 2021and just 9.4 times forward earnings estimates.
Just like that rotary phone at the garage sale, a little bit of dust doesn't mean it's not valuable. In fact, RingCentral's recent financial performance has been as clear as a local call over landlines. In 2022, the company reported revenues of nearly $2 billion, a 25% increase from the previous year. With robust revenue growth and an expanding customer base, this is one stock that could have your portfolio ringing off the hook.
So, while RingCentral might be trading at a discount right now, it just might be the deal of the decade. After all, one man's trash is another man's treasure. Or in this case, one investor's overlooked stock could be another stock buyer's golden ticket, with cloud-based whistles and AI-powered bells.
Turning the AI page to Alphabet's growth
At the next stop on your hypothetical garage sale foray, you spot a well-loved book titled "Artificial Intelligence 101." It's a bit worn, but you know it's a gem. That's Alphabet for you. It might have been slightly overlooked in the recent market turmoil, but this tech titan is a master of AI, and it's just waiting to show its true colors. That book would feel reassuring on your nightstand, just as the stock looks like a solid money-maker in your investment portfolio.
Alphabet is no stranger to the world of AI. In fact, it's one of the field's leading pioneers. From enhancing search results to driving advancements in self-driving vehicles, Alphabet is leveraging AI to push the boundaries of what's possible. And let's not forget about Google Assistant, your handy AI-powered helper that's always ready to answer your queries, manage your schedule, or even tell you a joke whenever you need it.
Now, some critics might argue that AI, especially advanced and user-friendly AI systems like OpenAI's ChatGPT, poses a threat to Google's search business. But let's flip the script here. Alphabet isn't just watching the AI parade from the sidelines; it is leading the march. The company invests heavily in AI, using it to improve its core products and services, and exploring new ways to make AI more accessible and useful. And that's not even news -- just something Alphabet has been doing for years.
Despite its mighty AI prowess and innovative spirit, Alphabet's stock has been trapped in Wall Street's discount aisle. As of the end of May 2023, shares are trading at $123, 18% off the all-time highs in the good old days of November 2021, where the inflation-based market panic started. Plus, with a forward P/E of 20 and a P/FCF of 25, Alphabet's valuation is looking more like an affordable paperback than a glitzy hardcover.
But you know the ABCs of Alphabet -- don't judge this book by its cover. Alphabet's recent financial performance reads like a best-seller. First-quarter sales ticked upward despite a raging downturn in the digital advertising market, and free cash flows surged 12% higher year-over-year to $17.2 billion. With its strong focus on AI and its current undervaluation, Alphabet could be a page-turner in your investment portfolio.
So, while Alphabet might be sitting on the discount shelf right now, don't overlook its potential. This looks like your chance to pick up an early edition of a future classic -- at highly affordable yard-sale prices.
