Value stocks are increasingly attractive now due to their historically strong long-term performance, especially as interest rates decline. With inflation stabilizing and many stocks facing potential overvaluation, value stocks present a lower-risk opportunity for investors seeking reliable returns.
Therefore, investors could consider buying fundamentally strong value stocks such as Stellantis N.V. (STLA), Centene Corporation (CNC), and Cardinal Health, Inc. (CAH) for their discounted valuations and solid fundamentals, before Wall Street catches on.
U.S. inflation is decelerating, contributing to economic stability. Gross domestic product (GDP) grew at an annualized 3.0% in Q2 2024, while gross domestic income (GDI) surged to a revised 3.4%. These positive trends reflect a balanced economic environment with improved corporate profits, reduced inflationary pressures, and stronger consumer spending.
Despite ongoing uncertainties, the recent 50 basis point rate cut by the Fed has the potential to foster greater economic stability, increase profits through reduced borrowing costs, and enhance investor confidence. This environment makes undervalued stocks particularly appealing, as they stand to gain from improved earnings potential and a more positive market sentiment.
Considering these trends, let’s assess the fundamentals of the abovementioned value stocks.
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, the Netherlands, STLA designs, manufactures, distributes, and sells automobiles and light commercial vehicles, engines, transmission systems, metallurgical products, mobility services, and production systems worldwide.
On September 30, 2024, STLA announced that Leapmotor International has opened orders for the T03 and C10 electric vehicles in Europe through STLA’s brand dealers. This joint venture aims to expand global sales of affordable, high-tech electric vehicles, with deliveries expected later this year.
On September 17, 2024, STLA inaugurated its global commercial vehicles hub at Mirafiori Automotive Park 2030 in Turin, Italy, to streamline cross-brand functions and strengthen leadership in the commercial vehicle market. STLA Pro One aims to enhance efficiency and global operations, with commercial vehicles accounting for one-third of the company's total net revenue.
In terms of forward non-GAAP P/E, STLA’s 3.48x is 80% lower than the 17.39x industry average. Its 1.57x forward EV/EBITDA is 84.8% lower than the 10.36x industry average. Likewise, its 2.28x forward EV/EBIT is 85.2% lower than the 15.44x industry average.
STLA’s net revenues for the first half ended June 30, 2024, stood at €85.02 billion ($94.91 billion). Its net profit attributable to the owners of the parent was €5.62 billion ($6.27 billion), and its adjusted operating income came in at €8.46 billion ($9.44 billion). Furthermore, the company’s adjusted EPS was €2.36.
Street expects STLA’s EPS and revenue for fiscal 2025 to increase 12.6% and 4.9% year-over-year to $5.20 and $196.98 billion, respectively. Over the past month, the stock has declined 4.3% to close the last trading session at $16.06.
STLA’s POWR Ratings reflect robust prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
STLA is ranked #14 out of 54 stocks in the Auto & Vehicle Manufacturers industry. It has an A grade for Value and a B for Stability. To see STLA’s Growth, Momentum, Sentiment, and Quality ratings, click here.
Centene Corporation (CNC)
CNC operates as a healthcare enterprise that provides programs and services to underinsured and uninsured families, commercial organizations, and military families. The company operates through segments including Medicaid, Medicare, Commercial, and Other.
On September 23, 2024, CNC’s subsidiary, Health Net, was selected to provide managed dental care services for Medi-Cal beneficiaries in Los Angeles and Sacramento counties under a new 54-month contract starting July 1, 2025. Health Net will serve nearly 385,000 members in these counties.
On September 4, 2024, CNC’s subsidiary, Iowa Total Care, was awarded a four-year statewide Medicaid contract by the Iowa Department of Health and Human Services to continue providing Medicaid managed care services under the Iowa Health Link program. The contract begins July 1, 2025, with a potential two-year extension.
In terms of forward non-GAAP PEG, CNC’s 1.38x is 30.1% lower than the 1.97x industry average. Likewise, its 10.92x forward non-GAAP P/E is 49.9% lower than the 21.78x industry average. Also, its 0.25x forward EV/Sales is 93.2% lower than the 3.69x industry average.
In the fiscal second quarter that ended June 30, 2024, CNC’s total revenues rose 5.9% year-over-year to $39.84 billion. Likewise, its earnings from operations rose 5% from the year-ago value to $1.23 billion. The company’s adjusted net earnings and adjusted EPS increased 11.1% and 15.2% over the prior-year quarter to $1.28 billion and $2.42, respectively.
For the quarter ending September 30, 2024, CNC’s revenue is expected to increase marginally year-over-year to $38.08 billion. Its EPS for the quarter ending December 31, 2024, is expected to rise 45.8% year-over-year to $0.66. CNC surpassed the Street EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 10.7% to close the last trading session at $74.58.
CNC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Growth and Quality. Within the A-rated Medical - Health Insurance industry, it is ranked #2 out of 10 stocks. To access the additional POWR Ratings of CNC for Momentum, Stability, and Sentiment, click here.
Cardinal Health, Inc. (CAH)
CAH operates as a healthcare services and products company internationally. It provides customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories, physician offices, and home-based patients. The company operates in two segments: Pharmaceutical and Specialty Solutions, and Global Medical Products and Distribution.
On September 20, 2024, CAH announced its agreement to acquire Integrated Oncology Network (ION) for $1.12 billion in cash. The acquisition will expand CAH’s Navista oncology practice alliance, adding over 100 providers across more than 50 community-based sites in 10 states.
On August 21, 2024, CAH announced plans to open a new 249,000-square-foot distribution center in Walton Hills, Ohio, by spring 2025. The facility will feature advanced technology and automation to enhance medical product distribution efficiency and customer service.
In terms of forward Price/Sales, CAH’s 0.12x is 96.8% lower than the 3.78x industry average. Its 10.53x forward EV/EBIT is 37.6% lower than the 16.89x industry average. Likewise, its 14.40x forward non-GAAP P/E is 33.9% lower than the 21.78x industry average.
CAH's revenue for the fourth quarter, which ended on June 30, 2024, increased 12.1% year-over-year to $59.87 billion. Its non-GAAP gross margin rose 5.5% over the prior-year quarter to $1.88 billion. For the same quarter, the company’s non-GAAP net earnings and non-GAAP EPS were $450 million and $1.84, respectively, up by 22.6% and 28.7% compared to the prior-year quarter.
Analysts expect CAH’s EPS for the quarter ending March 31, 2025, to increase 5% year-over-year to $2.18. Its revenue for fiscal 2026 is expected to grow 8.2% year-over-year to $234.25 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, CAH’s stock has gained 24.7% to close the last trading session at $109.79.
CAH’s POWR Ratings reflect this positive outlook. CAH has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Growth and Value and a B for Stability. Within the Medical - Services sector, it is ranked #3 out of 60 stocks. To access additional grades for CAH’s Momentum, Sentiment, and Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
STLA shares were trading at $13.96 per share on Monday afternoon, down $2.10 (-13.08%). Year-to-date, STLA has declined -40.14%, versus a 21.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
3 Value Stocks to Buy Now Before Wall Street Catches On StockNews.com
