Despite heightened recession fears ahead of the Fed’s anticipated July rate hike, consumer sentiment improved marginally to 51.1 in July from an all-time low of 50 in June. However, due to the Central Bank’s aggressive stance on inflation, recessionary fears are growing.
Chief U.S. economist Paul Ashworth of Capital Economics stated, “Confidence is still very, very, low, illustrating that surging inflation and the damage it is doing to their purchasing power is a big issue for households.”
Investors’ interest in quality undervalued stocks is evident from the Vanguard S&P 500 Value ETF’s (VOOV) 3% gains over the past month. Therefore, it could be wise to buy under-$6 stocks Nokia Oyj (NOK) and trivago N.V. (TRVG), which are currently trading at significant discounts to their peers and have solid growth prospects.
Nokia Oyj (NOK)
Headquartered in Espoo, Finland, NOK provides mobile, fixed, and cloud network solutions worldwide. The company operates through four segments: Mobile Networks; Network Infrastructure; Cloud and Network Services; and Nokia Technologies.
On July 12, 2022, NOK announced it extended its partnership with Hill Air Force Base and the National Spectrum Consortium. Their collaboration aims to maintain the smooth co-existence of radar and 5G networks in a shared spectrum. Additionally, the project is part of a wider initiative by the Office of the Under Secretary of Defense Research and Engineering for its first batch of 5G wireless testbeds.
Moreover, on July 11, 2022, NOK partnered with AT&T Inc. (T) Mexico’s 5G Innovation Lab to support the development of a 5G ecosystem in the country. The project is expected to conclude later this year and should benefit the company.
For its second quarter ended June 30, 2022, NOK’s net sales came in at €5.87 billion ($5.97 billion), up 10.5% year-over-year. Its profit for the period came in at €460 million ($467.68 million), up 31.1% year-over-year, while its EPS came in at €0.08, up 33.3% year-over-year.
NOK’s forward EV/S of 1.03x is 64.1% lower than the industry average of 2.88x. Its forward EV/EBITDA of 6.53x is 48.5% lower than the industry average of 12.69x.
Analysts expect NOK’s revenue to increase 2.1% year-over-year to $26.23 billion in 2023. Its EPS is estimated to grow 14.2% per annum for the next five years. It surpassed EPS estimates in each of the trailing four quarters. Over the past month, the stock has gained 9.4% to close the last trading session at $5.12.
NOK’s POWR Ratings reflect its solid prospects. The company has an overall B rating, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In addition, it has an A grade for Value. It is ranked #12 out of the 53 stocks in the Technology - Communication/Networking industry. Click here to see the additional POWR Ratings for NOK (Growth, Momentum, Stability, Sentiment, and Quality).
trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG and its subsidiaries operate a global hotel and accommodation search platform. It offers an online meta-search for hotels and accommodation through online travel agencies, hotel chains, and independent hotels.
TRVG’s total revenue increased 165.9% year-over-year to €101.64 million ($103.48 million) for the first quarter ended March 31, 2022. The company’s revenue from the related party came in at €33.93 million ($34.55 million), up 345.5% year-over-year. In addition, its cash, cash equivalents, and restricted cash came in at €269.07 million ($273.95 million), up 39.1% year-over-year.
TRVG’s forward EV/S of 0.51x is 74.3% lower than the industry average of 1.99x. Its forward P/S of 0.94x is also lower than the industry average of 1.40x.
Analysts expect TRVG’s revenue to increase 50% year-over-year to $589.63 million in 2022. Its EPS is estimated to grow 40.3% per annum for the next five years. The stock has lost 5% over the past month to close the last trading session at $1.51.
TRVG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth and Value. Within the Internet industry, it is ranked first among 65 stocks. Click here to see the additional POWR Ratings for TRVG (Momentum, Stability, and Sentiment).
NOK shares were trading at $5.10 per share on Friday afternoon, down $0.02 (-0.39%). Year-to-date, NOK has declined -17.79%, versus a -16.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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