Being a rational investor, investing in the stock market isn’t an easy task at all considering the uncertainty these days. As one month of the new year has already passed, it’s time to start thinking about an investing strategy for 2022. Investing in undervalued stocks is an old and highly effective strategy, which is also known as the Warren Buffet way.
Since the market is hovering near all-time highs, investors can benefit from being more selective as many of the popular high-flying growth stocks already look expensive. Investing in undervalued stocks for huge profit in 2022; they’re quite a few options.
Here are the five best-undervalued stocks with profitability to invest in and make a huge profit in 2022.
Cohu Stocks. (COHU)
Cohu (COHU) is a semiconductor-service company that provides essential testing and handling equipment to the world’s largest semiconductor producers. The company has pivoted its focus to its automotive-related product line to help alleviate the industry’s supply issues. Cohu has continued to attract new customers through this strategy.
Cohu has continued to improve its revenue at a quick pace over the last five years. In 2016, COHU recorded $282.1 million in revenues. In the trailing twelve months, the company has already made $897 million and is expected to end the year with $902.7 million in revenues. That highlights the booming demand for its products and services.
Cohu’s growth in 2021 has been astonishing. COHU during the recent third-quarter outcomes, reported quarterly earnings of $0.70 per share, in line with the Zacks Consensus Estimate. This compares to earnings of $0.27 per share a year ago.
As per the whispers in the market, it is expected that the semiconductor shortage will continue into 2022. That puts Cohu in a great position to continue strong growth momentum, adding to its customer list as producers try to increase manufacturing capacity to meet demand. With analysts expecting $3.05 in earnings per share for the company this year, the stock trades at a multiple of just 11.2 times.
COHU stock looks promising and the prospects as we kick off 2022 are bullish enough. One of the analysts from Wall Street has predicted COHU stock to reach $65 per share, proving it to be an undervalued stock, worth investing in. Therefore, COHU is the right buy for 2022.
GoPro Stocks. (GPRO)
GoPro (GPRO) is a renowned camera and drones manufacturer. GPRO made headlines when it went public in 2014 and since then it has fallen over 85%. Despite being the leader in the action camera industry, investors perceived GoPro as too one-dimensional with limited growth prospects.
But that has changed recently with several new initiatives announced since 2020 to turn the company around. Rather than selling all of its cameras at a wholesale rate through retail channels, it built a direct-to-consumer business on its website. GoPro.com accounted for over 50% of sales in the trailing 12 months. In the second quarter of 2021, the gross margin expanded 950 basis points year over year to 39.8%, making the company more profitable.
Another big contributor to profitability is GoPro’s new subscription business, which delivers a gross margin in the range of 70% to 80%.
The increase in GoPro subscribers has rapidly soared in 2021. As per the second quarter stats, GPRO gained 212% more subscribers reported around 1,160,000 from 372,000 last year period. With increasing customers, the company has created a subscription model for $49.99 per year to unlock a range of exclusive benefits. The initiative has been incredibly successful and could generate $90 million in recurring revenue in 2022 – most of which will be gross profit.
Analysts expect GPRO to deliver $0.76 in earnings per share for 2021. For a company on the upswing with impressive growth, the current stock price will likely be a bargain, in retrospect, as we move through the new year.
Western Alliance Bancorp. (WAL)
Western Alliance Bancorporation (WAL) operates as the bank holding company for Western Alliance Bank that provides various banking products and related services. With a modest market cap of $12.20 billion and a similarly modest $52 billion worth of assets on its books, it just doesn’t turn a lot of heads.
This small bank is growing in a big way. WAL has 45% more assets on its books than it did at the end of 2020, and twice as much as it had on the books at the end of 2019. Western Alliance has cashed in from the rising real estate market. During the third quarter, the company expanded its loan portfolio to $34.8 billion driven by strong demand for mortgages. While the loan-loss provisions are also shrinking. That’s a great sign for WAL heading forward into 2022.
Apart from that, new borrowers are opening checking accounts at Western Alliance. WAL’s total deposits had increased by $16.4 billion from their September 2020 level to $45.3 billion in September 2021. That shows that Western Alliance is on the right track and towards increasing portability in the new year.
WAL stock is still only trading at 12.1 times 2022’s expected earnings, which should be 12% better than 2021’s projected profit. Bank of America Securities has rated the stock as a buy with a price target of $150, making it one of the most undervalued stocks to invest in.
Raymond James Financial (RJF)
Raymond James Financial (RJF), through its subsidiaries, engages in the underwriting, distribution, trading, and brokerage of equity and debt securities. Aside from supporting 8,400 financial advisors, Raymond James maintains analytical research on more than 1,000 publicly traded companies. RJF may not be a powerhouse within the retail investing industry, but it’s a player, to be sure.
Raymond James’ prominent feature of its business model is its recurring fees. That’s a key reason fiscal 2020’s top line soared by 11% rather than down, despite the impact of the pandemic. In 2021, RJF has benefited from an impressive performance of the Capital Markets and Asset Management segments, which majorly drove revenue growth. During the fourth quarter, the company reported net revenues of $2.70 billion, increasing 30% year over year. While the fiscal 2021 revenues totaled around $9.76 billion, 22% more than last year. RJF surpassed the quarterly earnings estimate of $1.75 per share as the company posted $2.06 per share.
With that, Raymond James Financial maintains a strong balance sheet position. While assets balance and lower provisions have also increased.
Raymond James has topped earnings estimates in each of its past six quarters, and analysts are calling for revenue growth of more than 9% this year even as they expect earnings to contract. Regardless, the analyst crowd is looking for 10% revenue growth next year, which should drive the company to a record-breaking full-year profit of $7.86 per share.
RJF stock is currently priced at only 12.7 times the estimated forward earnings, suggesting that investors are missing the reliability of the company’s revenue stream.
State Street Corp. (STT)
State Street (STT) operates via its subsidiaries and provides a range of financial products and services to institutional investors worldwide. STT is known for its variety of services to investment managers. Moreover, it is also the company behind the popular SPDR family of exchange-traded funds such as the SPDR S&P 500 ETF Trust and SPDR Gold Shares.
State Street collects a small piece of investors’ total investments in its exchange-traded funds. The mechanism is similar to the collection of recurring fees for offering services to other asset managers. That puts the company in a good position but doesn’t make STT completely immune to economic headwinds.
The interesting thing about STT has been its survival during the pandemic period in 2020. Where fee revenues shrank during the last year, State Street’s fee revenue of $9.5 billion was actually 3.8% higher than its 2019 fee revenue. While the net income grew at an even better 8% rate during the last year. The company’s seeing comparable growth through the first three quarters of 2021 as well, despite plenty of turbulence.
The consistent strength of STT to come out of challenges and perform well has attracted investors. Even with the company’s reliable fiscal growth, STT stock is only priced at 11.4 times next year’s projected earnings of $8.44 per share. Therefore, STT is another major company that falls under the undervalued stocks category.