3 Underrated Stocks Poised to Shock Wall Street

As stock prices soar in the current bull market, investors are likely to find the best value among undervalued stocks.

The stock market can often feel like a treasure chest, with opportunities around every corner. However, investors who have tunnel vision on high-growth stocks may overlook a diamond in the rough from time to time. I’m referring to those underappreciated and, more importantly, undervalued stocks. The modern term for this is value investing, where investors look for contrarian investment opportunities to capitalize on long-term gains.

This year promises to be spectacular for the markets with the S&P 500 Stocks rose 11% in the first quarter. As markets hit new highs, it seems reasonable to assume that stocks leading the uptrend may be too overvalued to offer substantial long-term returns.

In this environment, I believe that undervalued stocks that are poised to surge and shock Wall Street are smart investments. These industry leaders have strong fundamentals, robust growth potential, and are in sectors with favorable long-term trends.

Lowe’s (BAS)

Lowe’s Businesses (NYSE:WEAK), a leader in the field of residential renovation, should experience a resurgence of interest in the coming months. This recovery will be driven by the company’s two key assets: an extensive in-store presence and a loyal customer base. These factors, along with the expected rebound in the real estate market, will set the stage for its comeback.

The financial results, however, paint a mixed picture. Comparable sales in the last quarter were down 4.1% from a year earlier and are expected to decline by 2-3% for the full year. But on the other hand, the dividend rate was increased by 5%, suggesting confidence in future earnings potential.

While sales and growth have certainly been a challenge for Lowe’s, my long-term outlook for the company remains positive. Lowe’s is focused on returning value to its shareholders with share repurchases totaling $743 million in the first quarter. Additionally, the company continues to invest in several offerings such as the DIY loyalty program and the Pro business. These investments will allow the company to take advantage of the expected rebound in the housing market.

It is also worth noting that Lowe’s forward P/E ratio is 17.7 while the industry average is 20.8. Needless to say, this underrated stock is poised to shock Wall Street with a strong core business and favorable market trends.

Delta Airlines (DAL)

With the summer season just around the corner, it’s safe to say that airline stocks are set to see a surge in the coming months. One name that currently appears undervalued is Delta Airlines (NYSE:DAL). After a slow recovery from the pandemic, the airline is back on its feet and posted strong first-quarter results. However, the stock remains undervalued, trading at a 22% discount to its pre-pandemic price.

The case for this undervalued airline stock is compelling. In addition to posting a 6% increase in revenue, Delta is seeing an increase in premium travel. The airline’s premium travel revenue increased 10% and accounted for 57% of total revenue. This differentiates the airline from its industry peers and will be a major growth driver in the years ahead.

In other good news, Delta anticipates free cash flow of $3 million to $4 million (FCF) that will reduce its debt. This positive outlook will be reinforced by an accommodative monetary policy that will stimulate consumer spending and further reduce debt. In addition, Delta’s focus on its premium customers and improving the traveler experience will ensure its long-term profitability.

In short, undervalued stocks like Delta are poised to rise in the months ahead.

PayPal (Credit Card Payment)

Fintech platform actions Pay Pal (NASDAQ:Pypl) have had their ups and downs in recent years. Today, in a competitive environment, the stock is down 80% from its pandemic highs, trading at a forward price-to-earnings ratio of 14.1. In other words, PYPL stock appears significantly undervalued.

Looking at the company as a whole, it’s fundamentally sound. PayPal was one of the first online payment companies, giving it a first-mover advantage. However, new entrants to the market have crushed its stock in recent years.

But let’s focus for a moment on its long-term potential rather than its short-term prospects. One of the main catalysts for better performance is PayPal’s Venmo business. This platform represents a significant portion of PayPal’s total payments volume and has the potential to capture a larger market share if PayPal continues to invest in it.

The scenario is positive, as the first quarter figures show. First quarter revenue increased by 9% compared to the previous year and payment volume increased by 14%. This suggests that PayPal is able to perform well despite the competitive environment. In addition, the growing popularity of digital payments will further boost PayPal’s transaction volumes and performance.

PYPL stock is currently undervalued and has considerable upside potential. However, the competitive landscape remains an underlying threat, making undervalued stocks like this ideal for risk-averse investors.

As of the date of publication, Divya Premkumar 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 author, subject to the advice of InvestorPlace.com Publication Guidelines.

As of the date of publication, the responsible editor did not hold (either directly or indirectly) any positions in the securities mentioned in this article.