Benzinga - by Cory Mitchell, Benzinga Contributor.
These four companies appear to be a good deal based on future earnings expectations and trading at a low price/earnings (P/E) ratio compared to historic norms.
When a company is growing earnings and trading at a low valuation, then investors can benefit from a rising share price if the P/E moves back to more normal levels, or earnings continue to increase even if the P/E doesn't increase. The ideal scenario occurs when the company grows earnings and the P/E rises to more typical levels.
If these four companies deliver the earnings expected (or close to it) for 2025 and the P/E moves back to more typical levels for these stocks, then all of them offer 100% upside or more relative to the current price.
Looking out to 2025 means these investments could last approximately 1.5 to 2.5 years. If the prospects for the company still look good, trades could be held longer. If earnings expectations fall, then the trades may be held for a shorter time, or the price targets revised.
Here is a list of great value stocks available on the market right now, with the potential for more than 100% upside over the next couple of years.
WNS Holdings Limited (NYSE: WNS) is trading at a P/E of 16.1 with a forward P/E of 9.9. A P/E of 25 is common for this company. Analysts project earnings of $4.57 for 2025. If the company can generate those earnings and return to a more common P/E of 25, that implies a share price near $114 (25 x $4.57). It currently trades at $45.23.
PayPay Holdings, Inc. (NASDAQ: PYPL) has a P/E of 16.9 and a forward P/E of 12. This company has often traded at a P/E north of 25. Analysts project EPS of $5.6 for 2025. If the stock can trade at a P/E of 25 at that time, the target price is $140. The stock closed on May 2 at $66.98.
Centene Corporation (NYSE: CNC) has a P/E of 14.7 and a forward P/E of 9.8. This stock often reaches a P/E of 20 or higher. Analysts project earnings of $7.57 for 2025. If the stock returns to a more normal P/E of 20 and attains those earnings, that implies a stock price near $150. The stock currently trades at $74.33.
Perficient, Inc. (NASDAQ: PRFT) has a P/E of 14.7 and a forward P/E of 9.8. A P/E value of 20 to 25 is common for this company. With earnings of $4.54 expected in 2025, that implies a share price of approximately $90 to $110. The stock is trading at $48.85 currently.
Outlooks can change. The price targets are based on expected earnings, which could change (higher or lower) and thus affect the target. There are no assurances the stock will trade at the more common and higher P/E values in the future, although each stock has regularly traded at a higher P/E than the current values. Make sure any trades taken align with your investment strategy and risk tolerance. This is not investment advice.
Disclaimer: The author has initiated long-term positions in the last month in PYPL, CNC, and PRFT, and will likely take a position in WNS over the next couple of weeks assuming the major market indices don't slide aggressively lower.
This article is from an unpaid external contributor. It does not represent Benzinga's reporting and has not been edited for content or accuracy.
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