Buy cheaply? Even in the stock market, buyers want to find a bargain. However, identifying a bargain can be difficult. There is a stigma attached to low stock prices, based on the fact that most stocks don’t drop in price for no reason. And those reasons often stem from some aspect of the company’s underperformance.
But that’s not always the case, and that’s why finding stock bargains can be difficult. There are many low-priced stocks with sound fundamentals and solid future prospects, and these options make it possible for investors to ‘buy low and sell high’. These are stocks that Warren Buffett thought of when he said, “Whether we’re talking about socks or stocks, I like to buy quality when it’s on sale.”
So take his advice and scan the market for stocks that are too cheap to ignore right now. Using TipRanks’ database, we’ve identified two stocks that have both the current low price – and the potential for strong upside next year. Not to mention each stock has received a “Strong Buy” consensus rating from the analyst community. Let’s dive in and find out what drives that lead.
Caleres Company (CAL)
We’ll start with Caleres, a footwear company with many brands including, among others, the name Dr. Famous Scholls. Caleres has been in business since the 19th century and employs more than 9,200 people across 68 countries. The company markets its products through a network of nearly 1,000 retail stores and 13 e-commerce sites.
Caleres has been showing solid financial results along with its solid market position. In the most recently reported quarter, Q3 of 22, the company posted record net sales of $798.3 million. Strong sales allowed the company to improve its inventory position, selling off some of the piled-up goods; inventory levels in the third quarter fell by 15.8% sequentially. The company’s adjusted EPS, although down 27% year-over-year, was still profitable at $1.15 and beat the consensus estimate of $1.12.
For investors, all of this supports the company’s commitment to payback. Caleres has an ongoing share buyback program, as well as regular quarterly dividend payments, and in Q3 sent $24.1 million back to shareholders.
Despite all that, the footwear company’s stock has fallen 19% over the past two months, closely trailing the S&P 500’s 2% slide.
Five-star analyst Mitch Kummetz, when covering CAL for Seaport, summed up his view on the stock in one simple line: “We believe the stock is too cheap for the company’s position.”
Kummetz goes into more detail, writing: “Our common ground is that CAL is undervalued, due to structural improvements over the past few years, as well as the way the company does business for the fourth quarter. 2022 and Fiscal Year 2023… First, the midpoint of CAL’s FY 2022 guidance assumes that early Q4 FY22 performance persists in the balance for the quarter and there is reason to believe it. would be better than this. Second, many retailers are canceling orders to ensure supply matches demand, but we do not believe this is not an important factor for CAL’s Brand Portfolio. Third, if the U.S. slips into a recession next year, overall footwear sales will likely struggle, but CAL seems well-positioned to hold its ground in such an environment. “
For these reasons, Kummetz rates Caleres stock as Buy and his $37 price target shows a one-year upside potential of ~67%. (To see Kummetz’s achievements, click here)
Overall, there are 4 recent analyst reviews of CAL and they include 3 Buy and 1 Hold to support the Strong Buy consensus rating. The stocks are priced at $22.18 and their average $32.50 price target suggests a 46% upside in the future. (See CAL stock forecast)
ZoomInfo Technology, Inc. (ZI)
From shoes, we will move to technology, where ZoomInfo lives in the cloud computing field. ZoomInfo provides a cloud-based platform for market intelligence. The company’s platform, by providing comprehensive, accurate information, enables users to enhance their sales, marketing, and recruitment activities. Marketers and salespeople, using ZoomInfo tools, can shorten their sales cycles and increase their success rates.
All of that sounds good, but ZI’s stock has fallen 47% in the past 12 months – so a closer look is needed.
In early November, ZoomInfo reported its 22nd quarter results — and the stock plummeted when the release went public. While Q3 showed solid revenue of $287.6 million, with a 46% year-over-year increase, unlevered free cash flow of $99.8 million and EPS of 24 cents, an increase of 84 % year over year, investors focused on a few disappointing pieces of news.
The company missed its quarterly bills, reporting $257 million where analysts had predicted $284 million, and its Q4 guidance, while in line with estimates, is considered was ‘weak’ at 21 cents EPS and $299 million in revenue. ZoomInfo will report Q4 data on February 6, and after that, investors will find out if it makes sense for them to withdraw their shares.
Canaccord’s 5-star analyst David Hynes covered ZoomInfo, and he believes the stock is too cheap right now. The 5-star analyst wrote: “There is no other way: ZoomInfo is in the box. Whether it was due to poor communication on the Q3 call or the seller being too dense to receive management signals, the 2023 estimate is still too high…. That said, based on our reset estimate for 2023… ZI stock is too cheap at ~23x EV/FCF. You can buy ZI now, or you can wait for management to issue ‘official’ guidance for ongoing consensus, but either way, we think this is a stock that investors should consider. growth and/or GARP should own.”
Therefore, it’s no surprise that Hynes rates ZI at Buy with a $43 price target, showing a strong ~68% gain over a year’s time. (To see Hynes’ achievements, click here)
Tech companies tend to get a lot of attention from analysts – and there are 18 recent analyst reviews of ZoomInfo. These break down 15 to 3 priorities Buy versus Hold, for a strong Buy consensus. Meanwhile, an average price target of $41.06 implies a 56% gain from the current share price of $26.26. (See ZI stock forecast)
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Disclaimer: The opinions expressed in this article are those of prominent analysts only. Content is used for informational purposes only. It is very important that you do your own analysis before making any investment.
