Many of the best-performing stocks over the past few years play into two big industries: artificial intelligence and electrification. Just look at the multiyear stock charts for Nvidia (NVDA 6.18%) and Tesla (TSLA -1.11%) as evidence.

Of course, most investors know these will be great growth industries over the next decade, and have thus bid up related stocks to very high valuations.

But what if I were to tell you there are other stocks that will also benefit from these megatrends, yet still trade at single-digit P/E ratios? Sure, these stocks aren't direct EV manufacturers or AI companies, but the growth of these industries will be beneficial to them. And with valuations that low, it won't take much for these stocks to go higher.

Atkore and Encore

Atkore (ATKR 0.98%) and Encore Wire (WIRE 0.29%) each produce electrical cable products that go into a variety of construction end-markets.

Encore Wire is a specialist in armored cable products, or anything that basically connects electricity from the transmission grid to an outlet or end-user. Encore has invested heavily in vertically integrating its supply chain and fabricates virtually all of the materials needed in its products, including copper rods, plastic compounds, and metallic sheathing, making it a low-cost, high-quality supplier.

Meanwhile, Atkore sells a lot of the same types of products as Encore, but it's more diversified, selling not only a lot of electrical wire cable and conduit products but also installation accessories, as well as safety and infrastructure products like metal framing, mechanical pipe, cable trays, ladders, and fittings.

Atkore's strength is in that diversity, often delivering six or seven products in one truck with one invoice, thus saving the customer from having to source from many different vendors. And whereas Encore has grown almost entirely organically, Atkore's strength is in tuck-in acquisitions, which it then folds into its "Atkore Business System" to optimize manufacturing processes and employee and product development.

Basically, Atkore and Encore operate in a consolidated industry supplying electrical wire to both residential and nonresidential construction industries. And while each has pursued a different strategy, their similarities make both stocks attractive today.

Close-up of armored copper wiring.

Copper wire will drive the electrification of American infrastructure. Image source: Getty Images.

Why are these stocks so cheap?

Both of these stocks seem very undervalued today, with Encore and Atkore trading at high-single-digit multiples of earnings and mid-single-digit multiples on an Enterprise Value-to-EBITDA basis.

ATKR PE Ratio (Forward) Chart

ATKR PE Ratio (Forward) data by YCharts

Basically, it comes down to the fact that these companies were each able to raise their prices by a huge amount coming out of the pandemic and the inflationary environment of 2021. But as the Federal Reserve has raised interest rates very fast, prices for commodities have come down, and so, too, have Atkore's and Encore's pricing for their products. Therefore, their year-over-year revenue and profits are pulling back as well.

ATKR Revenue (TTM) Chart

ATKR Revenue (TTM) data by YCharts

But the declines may be short-lived

While some may be fretting over the deflation in these companies' pricing and the health of the housing market, it's highly unlikely that the high demand each has experienced over the past year will go away.

That's especially true because, not only do these companies supply housing, apartment, office, and commercial building projects, which may see headwinds from higher rates, but they also serve the construction of data centers, electrical infrastructure, high-speed broadband, and other manufacturing and industrial plants.

That latter group not only requires much more electrical wiring than a typical building, but those markets should also see resilient demand. Each end-market will see money from the Infrastructure Investment and Jobs Act, the CHIPS Act, and the Inflation Reduction Act. That money is just beginning to be spent this year and will continue to be spent over a multiyear period. Those laws are targeted to build domestic manufacturing capacity for semiconductors to fuel artificial intelligence applications, and to incentivize both demand and supply for electrification of the auto, utility, and industrial sectors.

With the U.S. now aggressively investing in domestic chip manufacturing plants, electric vehicle and battery plants, electric vehicle charging stations, moving electricity lines underground to prevent wildfires, and building out broadband to rural areas, all of those applications should keep Atkore's and Encore's products in high demand.

The outlook ahead

Even if pricing continues to normalize for these two companies, their rock-bottom valuations seem to factor in a lot of negativity already. Meanwhile, there could very well be more resilient revenue and earnings thanks to the growth of data centers for the artificial intelligence boom, the electrification of vehicles and utilities, and other domestic manufacturing projects that will require lots of electrical wire.

So while Nvidia and Tesla are no doubt leading these industries, they sport forward P/E multiples of 68 and 52, respectively. Meanwhile, Atkore and Encore Wire are each set to benefit from a lot of these same trends but have a much easier path for value investors to gain with their single-digit valuations.