last posts

These 3 very cheap value stocks could dominate the market in 2023


After years of seeing growth stocks outperform value stocks, investors saw a change in fortunes in 2022 as value stocks crushed growth stocks.

In an uncertain environment, valuations of high-growth stocks have fallen and investors have turned to stock valuations for safety.

As 2023 approaches, the good news for investors is that there are a number of value stocks that still look like absolute bargains. Keep reading to learn more about three of them.

VUG chart

VUG data by YCharts

1. Williams-Sonoma

Williams Sonoma (WSM -1.40%) is a recognized brand in the field of furniture. It generated exceptional results, with an operating margin of 15.5% in the third quarter. The company has seen dramatic growth during the pandemic and even into 2022 with comparable sales growth of 8.1% in the third quarter, outperforming its peers, and three-year comparable sales growth approaching 50%.

Despite this strong performance, the stock currently trades at a price-to-earnings ratio of just 7, and this cheap valuation has allowed the company to reduce its stock count by 11% over the past four quarters, increasing earnings per share.

The stock fell after Williams-Sonoma’s third-quarter earnings report, when the company strayed from its 2024 guidance calling for $10 billion in revenue. But that was more a reflection of macroeconomic uncertainty than any underlying business issues.

Williams-Sonoma is still well positioned to generate solid growth in 2023, and with its stock already cheap, it could easily surge, especially if we get a “soft landing” from Federal Reserve rate hikes in 2023.

2. Petco

Pet stocks are a recession-proof sector as consumers spend on their beloved creatures in good times and bad, and the surge in pet adoptions during the pandemic has widened the market.

While pet stocks largely collapsed in 2022 after this boom, the pullback has provided some good business in the sector. One of them is Petco Health and Wellness (FRAME 0.64%).

Petco has more than 1,500 stores nationwide and, along with PetSmart, dominates the pet retail industry. However, the company’s push towards digital initiatives and services is what really makes the title appealing, as it leverages its brick-and-mortar locations with higher-margin businesses such as veterinary care and grooming.

Overall revenue growth in its latest quarter was slow at 4% as the company sees stronger growth in 2021, but services revenue was up 14%, or 38% on a two-year basis, and digital revenue grew 10%, or 42% over a two-year time frame.

As it opens more veterinary clinics and grooming salons, Petco is expected to continue generating outsized revenue growth in its service segment.

The stock currently trades at a price-to-earnings ratio of 12, or just five times adjusted earnings before interest, tax, depreciation and amortization (EBITDA), making it an excellent recession-proof stock with potential. of increase.

An investor looking at multiple monitors

Image source: Getty Images.

3. The camping world

To finish, Camping World Holdings (CWH 0.68%)the nation’s largest RV retailer with nearly 200 locations, rounds out the list.

Camping World is currently offering a whopping 11% dividend yield. While this may make the stock seem like a yield trap, the retailer is well prepared for a potential downturn, is focused on cutting costs to fund its dividend, and continues to grow with its rollout strategy, by acquiring independent RV dealerships and changing brands. them as Camping Worlds.

The company has also seen success with its used RV business, which offers higher margins, and it has seen growth in used vehicles over the past quarter. It has also expanded its Good Sam membership program, which helps boost its service business and build customer loyalty.

The RV industry boomed during the pandemic, and as business slowed, Camping World’s profits fell, but revenue fell only slightly in its latest quarter, showing that news business was stickier than some might have expected.

Meanwhile, the wave of baby boomer retirements and the rise of remote working should help support VR demand.

Camping World shares are currently trading at a price-earnings ratio of 5 on a rolling basis and below 7 on a forward basis. If it can meet expectations in 2023 and pay its dividend, investors could see a strong return from the stock.



Font Size
lines height