While the overall stock market saw an exceptional rally in the wake of a slump last March, growth stocks, particularly those from the technology sector, have performed especially well thanks to new business trends driven by the pandemic. This is evident in the…
SPDR Portfolio S&P 500 Growth ETF’s (SPYG) more than 80% returns since hitting its 52-week low in March 2020.
Most growth stocks are now trading at lofty valuations. And while analysts expect a coronavirus vaccine-driven economic recovery to lead to a market rotation away from growth stocks to value stocks, many investors are still willing to pay a premium for the growth stocks based on their growth potential. Nevertheless, the SPDR Portfolio S&P 500 Value ETF’s (SPYV) 14.3% returns over the past three months versus the SPYG’s 11.6% suggests that investors have begun shifting their investments from growth stocks to value stocks.
So, this suggests that it could be a good idea now to bet on stocks that are relatively undervalued now but possess some growth attributes. This strategy could help one benefit from both a potential turnaround and continued growth.
McKesson Corporation (MCK – Get Rating), AGCO Corporation (AGCO – Get Rating), BJ’s Wholesale Club Holdings, Inc. (BJ – Get Rating), and Netgear, Inc. (NTGR – Get Rating) have recorded double-digit gains over the past year but are still trading at low valuations considering their growth potential.
McKesson Corporation (MCK – Get Rating)
MCK delivers management and organizational solutions to hospitals, clinics, pharmacies, and pharmaceutical companies. The company helps clients improve their financial, operational, and clinical performance. MCK’s stock has gained 24.7% over the past year.
MCK has recently been involved in distributing Moderna’s COVID-19 vaccine as part of Operation Warp Speed. MCK is also collaborating with TailorMed, to help healthcare seekers overcome financial barriers to medical care.
For the quarter ended December 31, 2020, the company saw a 6% increase in revenue year-over-year. Its diluted EPS gained 21% during the same period. MCK’s revenue has grown at a CAGR of 5% over the past three years.
MCK is expected to see revenue growth of 3.9% for the quarter ended March 31, 2021 and 3.8% in 2021. Its EPS is estimated to grow 15% in 2021 and at a rate of 10.6% per annum over the next five years.
In terms of non-GAAP forward price/earnings, MCK is currently trading at 11.32x, 57.2% lower than the industry average of 26.44x. Moreover, in terms of forward price/sales, MCK is trading at 0.12, which is 98.7% lower than the industry average of 9.49x.
MCK’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
The stock has an overall rating of A, which equates to Strong Buy in our proprietary ratings system. It has a grade of A for Growth. In the 76-stock Medical – Services industry, it is ranked #2.
In total, we rate MCK on eight different levels. Beyond what we stated above, we have also given MCK grades for Stability, Sentiment, Momentum, Quality and Value. Get all MCK ratings here.
AGCO Corporation (AGCO – Get Rating)
AGCO is involved in developing, manufacturing, and marketing agricultural machinery. The company’s range of products includes tractors, hay tools, and forage equipment. AGCO’s stock price has increased 66.6% over the past year.
AGCO is partnering with Universal Technical Institute to offer an agricultural manufacturer training program. The company has released a new feature on its Valtra Connect platform that enables farmers to foresee service needs.
For the quarter ended December 31, 2020, AGCO reported an…
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