While value stocks are plentiful in the market, they are often undervalued for a reason. Discerning an undervalued stock from a value trap requires some heavy lifting. Today’s best bargain stocks to buy fall in the former camp and are solid portfolio additions.
“Price is what you pay, value is what you get,” Warren Buffet has stated.
In the short term, this message might not resonate with the market. However, in the long term, adhering to valuation principles pays off. Remember, in the long run, the major determinant of returns is the starting valuation. So, if you pay a lower multiple, you will likely have higher returns.
According to this Finviz screen, these stocks are valued at a forward price-to-earnings (P/E) below 10. They also grew sales by 5% quarter-over-quarter in the most recent quarter. Besides, EPS will increase by over 10% annually, driving long-term share price appreciation.
So, with this perspective, let’s look at some of the best bargain stocks to buy today.
Bank of New York Mellon (BK)
One of the best bargain stocks to buy is the largest custodian, Bank of New York Mellon (NYSE:BK). The robust custody bank plus a $1.97 trillion investment management business highlights the inherent quality of the business.
Last year, the bank saw a steep decline during the regional bank turmoil. Its Pershing unit was a custodian for First Republic’s wealth management clients. When the bank collapsed, this segment saw significant outflows. However, the bank shrugged off these challenges to deliver amazing 2023 results.
For the full year, net revenues grew 7%. While fee revenues declined by 1% due to lower foreign exchange volatility and asset flows, net interest revenue grew by 24%, highlighting the impact of higher rates. Reported EPS increased 38% to $4 from $2.90 in 2023. Adjusted Return on Tangible Common Equity (ROTCE) was another highlight, improving 50 basis points to 21.6%.
From a fundamental standpoint, that was an outstanding year. Adjusted diluted earnings per common share increased from $4.59 in 2022 to $5.05. Thus, BK stock is currently valued at 11 times trailing earnings.
Also, management’s outlook for 2024 is optimistic. They plan to improve pre-tax margins to 33% and increase ROTCE to 23%. These improvements will fuel more gains in one of the market’s cheapest stocks.
Expedia (EXPE)
After the recent earnings report, Expedia (NASDAQ:EXPE) declined over 10% after news that CEO Peter Kern would depart. However, this departure is a well-planned succession that should cause alarm.
Kern, who joined the company in 2020, is leaving it in a great position. The firm has overhauled its technology platform into one tech stack. Going forward, this will enable the company to operate efficiently and be more agile while deploying new products globally.
Looking at free cash flow and profits, Expedia is one of the best bargain stocks to buy. In 2023, the online travel agency recorded $12.8 billion in revenue, representing 10% growth. Additionally, it achieved a 21% EBITDA margin, generating $2.7 billion in EBITDA.
With more cost streamlining in 2024, management expects another record year of EBITDA. Plus, the company has a new $5 billion buyback. Today, you can buy EXPE stock at a trailing EV/EBITDA multiple below 14.
Analysts also concur that the stock is cheap. Evercore ISI expects more price appreciation driven by revenue reacceleration and margin expansion. Analyst Mark Mahaney has a $200 price target representing an upside of over 40%. Travel demand is robust and Expedia is relatively undervalued compared to peers like Booking (NASDAQ:BKNG) and Airbnb (NASDAQ:ABNB).
Air Lease (AL)
This airplane leasing company lies within an industrial sweet spot. First, the resumption of travel to pre-pandemic levels has buoyed demand for aircraft. And with quality control issues at Boeing (NYSE:BA) leading to delayed deliveries, airlines are resulting to leasing in a bid to expand their capacity.
Air Lease (NYSE:AL) is well-positioned to meet the needs of airlines globally. As of Dec. 31, 2023, it had 463 aircraft in its fleet. Furthermore, it has over 200 established relationships with airlines in 70 countries. It is benefiting as airlines seek to replace aging aircraft with modern fuel-efficient jets.
Limited aircraft availability due to significant backlog at Boeing and Airbus (OTCMKTS:EADSY) means Air Lease will continue to benefit from increased leasing demand. Notably, its fleet is relatively young, with an average age of 4.5 years.
The 16% revenue growth in 2023 highlighted the high demand for leases. Looking at valuation, Air Lease is one of the best bargain stocks to buy. It trades at a cheap forward P/E of 8. Further, it is trading at a significant discount to its book value at a price-to-book of 0.66.
Based on management comments, the fundamental outlook is bright. Due to the short aircraft supply, most airlines are extending their leases. Also, limited supply is causing rising lease rates. This is an ideal environment for aircraft leasing companies, and Air Lease will thrive.
On the date of publication, Charles Munyi 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.