Stocks to buy

7 Beaten-Down Value Stocks Poised for an Epic Turnaround

With the S&P 500 reaching new highs last week, investors appear to be taking an optimistic view of the overall stock market. However, not all stocks are participating in this rally. Some high-quality companies are still trading at beaten-down valuations, making them attractive value plays for investors. As monetary policy continues shifting in a more dovish direction, we could be at an inflection point where these value stocks start to regain their previous luster.

That’s why I think now is an opportune time to take a closer look at specific value stocks that could be poised for an epic comeback. Value investing requires patience, but the rewards can be tremendous for those willing to wait. As Warren Buffet famously said, “Be fearful when others are greedy and greedy when others are fearful.” In the case of these value stocks, many still seem fearful, meaning we can be greedy in snapping these shares up at discounted prices. Let’s dive in and explore these worthwhile value stocks!

Bristol-Myers Squibb (BMY)

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As a pharmaceutical giant, Bristol-Myers Squibb (NYSE:BMY) offers critical medicines for various prevalent diseases like cancer, HIV/AIDS, cardiovascular issues, diabetes, hepatitis, rheumatoid arthritis, and psychiatric disorders. With many of these disorders increasing worldwide, Bristol-Myers’ business case seems strong. However, Wall Street recently punished the stock as revenue declined by $230 million year-over-year in 2022. Unfortunately, that slide continued into 2023.

I believe this is a temporary issue tied to Bristol-Myers’ COVID-era growth reverting to a more reasonable trajectory. The company’s core business is struggling amid patent expirations and margin pressures from free drug programs, causing declining sales. But with its sizable advantages, Bristol-Myers can likely acquire higher-growth biotech players and return to growth. Given its low 6.65 forward price-earnings ratio and meaty 4.84% dividend yield, BMY stock appeals to me right now.

While the current macro backdrop fails to impress, my long-term outlook remains bullish for this company. Bristol-Myers retains the resources to supplement its pipeline through mergers and acquisitions. Its vast size also provides economies of scale. So, I anticipate Bristol-Myers will stabilize its bottom line before resuming steady earnings growth. With patience, substantial returns may follow at today’s discounted valuation.

Hormel Foods (HRL)

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Like many consumer staples companies, Hormel Foods’ (NYSE:HRL) stock retreated considerably in 2023 amid high inflation and supply chain woes. Hormel offers various meat-related products, so input cost inflation directly impacted its business. However, with the economy stabilizing now, I expect Hormel to bounce back into growth mode.

Validation emerged last quarter, as the company’s revenue grew $240 million sequentially. The trends look sustainable, too. Analysts forecast double-digit earnings per share growth over the next two years alongside gradually-improving sales. Projections call for 0.7% revenue growth in fiscal 2024, building to 4.7% growth by 2027.

This Dividend King has a 3.7% yield and a reasonable 19.6-times forward price-earnings ratio. To me, that’s an attractive multiple, especially if forward 2027 numbers are hit, and the company’s multiple falls to 14-times. Hormel’s consistency through all market environments reassures me as well. At these levels, HRL stock appears poised to reward patient long-term investors.

Leggett & Platt (LEG)

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Leggett & Platt (NYSE:LEG) designs and manufactures engineered components for homes and vehicles, including bedsprings, furniture, flooring, car seats, and hydraulic cylinders. Like other companies in the furnishings business, Leggett’s profits sank recently due to inflation and other macro headwinds. While its top line held relatively steady, profits dropped 23% in 2022. That’s a big decline.

However, with inflation cooling and Leggett & Platt’s revenues remaining historically sticky, I expect bottom-line stabilization and eventual recovery. Analysts agree, forecasting a return to growth beginning in 2025.

Having fallen 60% off its peak, LEG stock also seems to be heavily discounted. It trades at just 14.7-times forward earnings, with metrics better than over 60% of industry peers. Additionally, the company’s 8% yield adds appeal to me as well. That may look too good to be true at first glance, but this is a reliable Dividend King with 53-plus years of consecutive hikes. Thus, now would be a great time to get into this stock, in my view.

Dollar General (DG)

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I’ve rated Dollar General (NYSE:DG) as a strong buy since October, though it has risen substantially since then. The stocks’ prior decline was profitability-related more than revenue-driven. Its top-line growth continued unabated. While a projected 30% earnings per share drop for fiscal 2024 stings, I doubt there lasting damage given easing inflation and falling rates.

As lower-income consumers regain their footing, retail should rebound. Middle and high-income spending has driven most consumption growth of late. However, I expect the tide to turn. Dollar General looks ready to run with its immense footprint poised to capture this resurgence.

In my view, the stock may take years to reach its former highs, but its growth prospects and momentum justify patience. DG stock still trades 45% below its peak, offering sizable upside potential even after its recent gains. So, I remain bullish on this company long-term.

JinkoSolar (JKS)

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Despite high debt levels, JinkoSolar (NYSE:JKS) has delivered sensational growth. The China-based solar company faces global tariffs, yet revenue and earnings continue growing rapidly. While its balance sheet risk spooks some investors, low interest rates in China ease my concerns.

Trading at 2.4-times 2023’s estimated $12 in earnings per share and only 0.09-times sales against 32% top-line growth, JKS stock seems almost unbelievably undervalued. Its projected earnings growth trajectory looks outstanding, too, with earnings per share expected to reach $20 by 2027.

These valuations strike me as nonsensical for a fast-growing company operating in a critical global industry. JinkoSolar offers deep value and substantial growth potential, a rare combination I cannot ignore. Again, this valuation is due to high debt and worries about China, but this company’s growth is impressive, and I don’t see it waning anytime soon.

Newell Brands (NWL)

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Newell Brands (NASDAQ:NWL) has struggled mightily amid high inflation and other economic woes. Its stock price has cratered more than 80% from its peak. But with growth set to bounce back sharply as its valuation remains depressed, I spy a comeback in the making.

Newell’s diverse portfolio of leading consumer brands, like Rubbermaid and Coleman, gives it an advantage. Trading at 0.44-times sales and 11-times 2024 earnings guidance (6-times 2027 projections), Newell looks deeply discounted at levels that seem to price in excessive pessimism over its future.

With analysts forecasting booming earnings growth in 2024 and beyond, alongside revitalized revenue growth, NWL stock has all the markings of an epic turnaround play in my eyes. The market hates it now, but future returns could prove the doubters wrong.

DZS (DZSI)

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Despite profit struggles, DZS (NASDAQ:DZSI) has fired on all cylinders in terms of its top-line growth. Specializing in booming areas like fiber optics, cloud software, and telecom networking, I think its future revenue prospects remain bright.

While its small size makes forecasts tricky, the rampant expansion of DZS’s target markets eases my long-term worries. And with the stock trading at just 5-times earnings and profitability projected for fiscal 2023, the company’s valuation bakes in quite pessimistic assumptions of growth falling off a cliff.

I expect DZS to leverage its proprietary technologies to capitalize on several secular global tailwinds. In my opinion, cloud, connectivity, IoT, and 5G are all tailwinds that play into this company’s strengths. So, at today’s prices, I see a compelling risk/reward ratio for patient investors.

On the date of publication, Omor Ibne Ehsan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Omor Ibne Ehsan is a writer at InvestorPlace. He is a self-taught investor with a focus on growth and cyclical stocks that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as cryptocurrencies and penny stocks. You can follow him on LinkedIn.

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