The stock market has been holding up despite the threat that rising COVID-19 cases could undermine the economic recovery. Nevertheless, many analysts expect the market to witness a correction of some stripe in the near term. For example, Miller Tabak chief market strategist Matt Maley stated his concerns about an impending market correction. Also, a survey of 550 global investors by the Deutsche Bank revealed a consensus expectation of a market pullback before year’s end.
While the Fed’s signal this week that it will continue supporting the economic recovery, for now, fueled a rally in the major benchmarks, the largest Chinese real estate company Evergrande’s potential collapse could fuel volatility in the near term. Therefore, we think it could be wise to invest in large-cap stocks, known for their ability to withstand market volatility and generate stable returns. Investors’ interest in large-cap stocks is evidenced by the Vanguard Large-Cap Index Fund ETF’s (VV) 33% gains over the past year.
So, the likely market pullback could be an excellent opportunity to bet on fundamentally sound large-cap stocks América Móvil, S.A.B. de C.V. (AMX), HP Inc. (HPQ), LyondellBasell Industries N.V. (LYB), and ASE Technology Holding Co., Ltd. (ASX). These four names look undervalued at their current price levels.
América Móvil, S.A.B. de C.V. (AMX)
AMX provides integrated telecommunications services in Latin America and globally. The company’s offerings include wireless fixed voice services as well as data services. It is based in Mexico City, Mexico. AMX has a $60.23 billion market capitalization.
On September 15, AMX announced its plans to sell 100% interest in its subsidiary Claro Panama, S.A. to Cable & Wireless Panama, S.A., an affiliate of prominent telecom company Liberty Latin America LTD (LILA). The agreed upon price stands at $200 million, which is expected to improve AMX’s cash flow.
In terms of non-GAAP forward PEG, AMX is currently trading at 0.61x, which is 62.2% lower than the 1.62x industry average. Its 5.48 forward EV/EBITDA multiple is 43.3% lower than the 9.67 industry average of 9.67.
In its second fiscal quarter of 2021, AMX’s total revenue increased 0.4% year-over-year to MEX$252.51 billion ($12.58 billion), while its net income increased 119.6% from the same period last year to MEX$42.82 billion ($2.13 billion). The company’s earnings per ADR rose 156% year-over-year to $0.64.
A $0.32 consensus EPS estimate for the current quarter (ending September 2021) indicates a 23.1% year-over-year increase. Likewise, the $12.80 billion consensus revenue estimate for the current quarter reflects an 8.6% year-over-year increase.
AMX has gained 50% in price over the past year to close yesterday’s trading session at $18.17.
AMX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
AMX has a Stability grade of A, and a Growth, Value, and Quality grade of B. In the 48-stock, A-rated Telecom – Foreign industry, it is ranked #3.
Click here to see the additional POWR Ratings for AMX (Momentum and Sentiment).
HP Inc. (HPQ)
HPQ is a multinational corporation that provides personal computing and other access devices in the United States and globally. The Palo Alto, Calif., company’s offerings consist of a portfolio of printers, PCs and mobile devices, and allied services and solutions. HPQ has a$32.46 billion market capitalization.
On September 22, the company launched its new cloud-first Managed Print Service (MPS) subscription plan that simplifies cloud-based printing solutions and lowers costs for customers. The service is expected to be widely available in the Spring of 2022 and should be in demand, given the increasing popularity of cloud-based solutions.
HPQ’s 0.58 forward EV/Sales multiple is 85.5% lower than the 3.97 industry average. In terms of non-GAAP forward PEG, HPQ is currently trading at 0.43x, which is 75.6% lower than the 1.78x industry average.
In July, HPQ signed a definitive agreement to acquire Canada-based software company Teradici Corporation. The company expects this acquisition to expand its capability to tap into the increasingly popular hybrid workspace solutions while addressing customer demands for greater mobility.
HPQ’s net revenue increased 7% year-over-year to $15.29 billion in its fiscal third fiscal quarter, ended July 31. Its non-GAAP operating margin rose 3.7 percentage points from the same period last year to 9.8%. Its non-GAAP net earnings came in at $1.20 billion, up 70.7% from the prior-year quarter, while non-GAAP net EPS climbed 104.1% year-over-year to $1.00.
The Street expects HPQ’s EPS to increase 43.5% year-over-year to $0.89 in the current quarter (ending October 2021). The Street’s $15.44 billion revenue estimate for the current quarter indicates a 1.2% increase from the same period last year. Moreover, HPQ has an impressive earnings surprise history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 49.6% in price over the past year to close yesterday’s trading session at $27.59.
It’s no surprise that HPQ has an overall B rating, which translates to Buy in our POWR Rating system.
The stock has a Value grade of A. In the 46-stock B-rated Technology – Hardware industry, it is ranked #6. `
In addition to the POWR Rating grades we’ve stated above, one can see HPQ grades for Growth, Momentum, Stability, Sentiment, and Quality here.
LyondellBasell Industries N.V. (LYB)
LYB is a multinational plastic, chemical, and refining company. Its offerings include chemicals, polymers, advanced polymers, fuel, and other associated technologies. LYB has a $31.61 billion market capitalization, and is headquartered in Rotterdam, the Netherlands. On September 9, LYB received the International Stability and Carbon Certification (ISCC) PLUS certification for products produced at four of its manufacturing sites in the United States, enabling LYB to extend its suite of products for customers and accelerating its ascension in the market for recycled and renewable-based polymers.
In June, LYB acquired Malaysia-based modified polyolefin compound manufacturer PolyPacific Polymers Sdn. Bhd. (PPM). Regarding the acquisition, Jim Guilfoyle, Executive Vice President, Advanced Polymer Solutions and Supply Chain at LYB, said, "We admire PolyPacific Pty. Ltd for the business and reputation they established over the past four decades, and wish them well as they continue to operate their Australian compounding business in Melbourne. We are excited to capture the value of PPM within our APS Asian footprint.”
In terms of non-GAAP forward P/E, LYB is currently trading at 4.71x, which is 65.8% lower than the 13.80x industry average Its 1.05 forward EV/Sales multiple is 37.5% lower than the 37,5% industry average.
For its second fiscal quarter, ended June 30, LYB’s sales and other operating revenues climbed 108.5% year-over-year to $11.56 billion. Its net income and EPS increased 555.7% and 552.1%, respectively, from the prior-year quarter to $2.06 billion and $6.13. Its EBITDA came in at $3.02 billion, up 297.1% from the same period last year.
The Street’s $5.75 EPS estimate for the current quarter (ending September 2021) reflects a 352.8% year-over-year rise. Likewise, the Street’s $11.33 billion revenue estimate for the current quarter represents a 68.4% increase from the prior-year quarter. In addition, LYB has surpassed consensus EPS estimates in each of the trailing four quarters.
LYB’s stock has gained 24.1% in price over the past year to close yesterday’s trading session at $91.23.
LYB’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates with Buy in our POWR Ratings system.
In addition, LYB has an A grade for Value, and a B for Growth and Sentiment. In the A-rated Chemicals industry, it is ranked #14 out of 94 stocks.
To see the additional POWR Ratings for Momentum, Stability, and Quality for LYB, click here.
ASE Technology Holding Co., Ltd. (ASX)
ASX operates in the field of semiconductor packaging, testing, and production of interconnect materials internationally. The company is headquartered in Kaohsiung, Taiwan. It has an $18.67 billion market capitalization.
ASX’s 1.17 forward EV/Sales multiple is 70.5% lower than the 3.97 industry average. In terms of non-GAAP forward PEG, ASX is currently trading at 0.46x, which is 74.1% lower than the 1.78x industry average.
In its second fiscal quarter, ended June 30, ASX’s total net revenues increased 18% year-over-year to NT$126.93 billion ($4.57 billion). Its operating income came in at NT$13.17 billion ($474.29 million), up 56.3% from the same period last year. Its net income attributable to shareholders of the parent climbed 49% from the prior-year quarter to NT$10.34 billion ($372.19 million). And its earnings per equivalent ADS rose 53.3% year-over-year to $0.16.
A $0.20 consensus EPS estimate for the current quarter (ending September 2021) represents a 100% increase from the prior-year quarter. Likewise, the $5.41 billion consensus revenue estimate for the current quarter reflects a 28.8% year-over-year increase. Moreover, ASX has an impressive earnings history; it surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 106.5% in price over the past year and 46.8% year-to-date.
ASX has an overall rating of B, which translates to Buy. In addition, the stock has an A grade for Value, and a B grade for Momentum, Stability, and Sentiment. In the 97-stock, B-rated Semiconductor & Wireless Chip industry, it is ranked #28.
Click here to see the additional POWR Ratings for ASX (Growth and Quality).
AMX shares were unchanged in after-hours trading Thursday. Year-to-date, AMX has gained 26.42%, versus a 19.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.4 Undervalued Large-Cap Stocks to Consider Buying on Market Pullbacks appeared first on StockNews.com