Market Cap: $530B
Forward P/E: 10.2
All things considered, AAPL is not going to stay this cheap forever. Yes, the sales decline looks bad, but keep in mind the comps from last year when the company grew revenue nearly 30%. This is more or less a software refresh for Apple. The iPhone 7 will be a big deal, just like the 6, 6 Plus, and 5 before it. And when the iPhone 7 launches, it will have very comparable comps to once more produce double digit top-line growth. That is ridiculously cheap! So cheap, that even if Apple stock were to trade higher by another 30%, it would still be cheaper than most Big Tech companies at eight times forward earnings, minus cash.
In other words, expect multiple appreciation in (AAPL) stock.
Market Cap: $241B
Forward P/E: 12.8
Currently, AT&T (T) is trading at just 13 times FY2017 earnings, a huge discount to the 20 times multiples seen in other “safe, high yield” stocks. Even if shares were to jump 30%, T stock would still be cheap, with a higher dividend that the consumer stocks that investors are piling into.Furthermore, AT&T has growth. This AT&T will grow 12%, and if the company can capture market share in Mexico and Latin America (and make a move into India), then it could end up growing far faster than the 2.5% that analysts expect in 2017.
Regardless, AT&T is a superior value, high-yield stock, even with gains of 30% from $39.
Delta Air Lines Inc. (DAL)
Market Cap: $35B
Forward P/E: 6
Delta shares have been punished in 2016 due to an influx in capacity, yet the company’s move to reduce capacity should allow its stock to build on further trading session’s rally. Much like the others on this list, (DAL) is unjustly valued, at just six times forward earnings. So even if shares pop 30%, the stock is still cheap! Given that Delta is expecting a return to unit revenue growth later this year, and analysts are forecasting 3% revenue growth next year, those stock multiples should start to appreciate.
Thankfully, there is a lot of room for DAL to run higher once sentiment starts to turn higher.
Market Cap: $3B
Forward P/E: 10
Another company in the market that beat last quarter’s expectations, raised full year guidance, is expected to grow revenue 37% this year and 18% next year, and trades at just 10 times. Fact is there is nothing like FIT in the market right now, nothing with that kind of growth, history of beating earnings and raising guidance, and that trades at just a crazy low multiple. If this were a software company, it would have a 50 times earnings multiple.
As a result, we can all conclude that a 13 times multiple (upside of 30%) still leaves FIT deeply undervalued.
General Motors Inc.
Market Cap: $47B
Forward P/E: 5.2
Up until recently, the auto industry has been the brightest spot of the U.S. economy. Nowadays, total shipments seemed to have peaked, but that’s because the industry is becoming more services focused, with ride-sharing, renting or leasing, and owning. General Motors (GM) is involved in all of these new services, all of which command much larger valuation multiples than the traditional sale and leasing of vehicles. Looking ahead, there are not many investments in the market better than (GM). Even if the stock were to soar 30% from $30.75, it would trade with a price-earnings ratio of just six! So clearly, there is loads of value in GM as the company moves forward with big initiatives to bring self-driving technology to the roads, launch larger ride-sharing programs with Lyft and enter the rental car space to compete with the likes of Hertz (HTZ).
As an added bonus, (GM) pays a dividend yield of 5%, making the attractive even more appealing.
At moment of writing J.Mason did not hold any of the above securities.