3 Undervalued Stocks to Buy Before 2025

The holidays are right around the corner, which means it’s time to kickstart your shopping spree. But instead of picking up gifts for friends and family, how about snagging some undervalued stocks to add to your investment portfolio? With the fourth quarter being historically one of the best times to engage in the stock market, the present moment is golden for positioning yourself with new stock selections.

Understanding Undervalued Stocks

To identify companies with immense potential for growth, GOBankingRates focused on undervalued stocks characterized by strong fundamentals. These are stocks boasting low price-to-earnings (P/E) ratios coupled with a substantial amount of free cash flow relative to their stock prices. Let’s dive into three standout choices that may just be ripe for the picking.

1. Federated Hermes (FHI)

Recently upgraded to a buy rating from Zacks, Federated Hermes (FHI) has seen a price rise, but don’t think the window is closing just yet. Ulrich Ebensperger, Co-Founder and CEO, named FHI as a stellar undervalued stock that warrants a place in your portfolio. Why? For starters, it’s currently priced at just 9x projected 2025 earnings, making it an attractive purchase.

FHI ranks among the most profitable firms in its sector, flaunting a remarkable 15% return on assets, significantly outpacing competitors such as Blackrock and Blackstone. Shareholder value is a critical focus, highlighted by regular share buybacks and a healthy dividend yield of approximately 5.95%.

In addition, FHI’s PEG ratio is below one, showing strong adjustments for earnings growth. With a price-to-book (P/B) value of 3, it’s trading significantly below peers, marking it as a potential market mispricing.

2. United Therapeutics (UTHR)

Next up, we have United Therapeutics (UTHR), which made waves during its recent earnings call, reporting a remarkable revenue surge to $715 million for Q2 2024—an impressive 20% increase compared to the same quarter in the previous year. Despite this robust performance, UTHR is still perceived as trading at a value, according to Ebensperger.

With a forward P/E ratio sitting at just 13.2x, it’s a bargain when considering UTHR’s solid track record of revenue and earnings growth. The company specializes in treating pulmonary arterial hypertension (PAH), with the market projected to grow at an annual rate of 5.5%. This positions UTHR for sustained value generation in the upcoming years, alongside its excellent financial health, evidenced by available cash surpassing liabilities.

3. PayPal (PYPL)

Last but not least, let’s take a closer look at PayPal (PYPL). Even though PYPL’s stock price has appreciated notably in 2024, it has struggled to reclaim its footing since hitting a peak in 2021. After its latest earnings release, many analysts see a turning point on the horizon. Year-over-year (YoY) net revenue jumped 8%, and GAAP operating income soared by 17%—not bad for a company on the ropes.

Ebensperger notes that PYPL’s P/E and pricing-to-sales metrics are hovering around their all-time lows. The stock made a notable breakout to the upside in August, buoyed by early signs that significant cost-cutting and restructuring measures were bearing fruit. Following a reduction in global workforce by 9%, operating margins have bolstered to 18.5%, improving by 231 basis points in the last reporting period.

Final Thoughts

As 2024 winds down, the time is ripe for astute traders to seek out underappreciated stocks that hold immense potential for future growth. With their attractive P/E ratios, formidable cash flows, and strong market positions, Federated Hermes (FHI), United Therapeutics (UTHR), and PayPal (PYPL) provide excellent opportunities for savvy investors looking to get ahead of the curve before we roll into 2025.

Make sure to do your homework, analyze each stock’s performance, and keep an eye on the broader market trends. This holiday season, let your investment strategies shine alongside your festive lights!

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Discover 3 Undervalued Stocks to Snatch Up Before 2025 for Maximum Gains