Red ink is usually never a pleasant sign, especially after you acquired a significant position in certain publicly traded companies. Nevertheless, cheap stocks also provide a long-term opportunity for forward-thinking speculators. It takes discipline to buy the pain and not be discouraged with the volatility. However, if you pick the right ideas, the immediate discomfort can lead to long-term rewards.
Of course, selecting the right ideas is easier said than done. For retail investors, it’s important to ignore much of the noise of nominally cheap stocks. Sure, picking up something for a few bucks a share might seem psychologically satisfying. However, you want to acquire quality names at bargain prices. Otherwise, those cheap securities can become even cheaper.
With this list of intriguing ideas, we’re only dealing with analyst-approved ideas. If the experts don’t like it, there may be less of a reason to go contrarian on it. More importantly, these businesses can be set for future growth; in other words, we’re likely dealing with legitimate discounts. On that note, below are cheap stocks to consider.
Imperial Oil (IMO)
Falling under the integrated oil and gas industry, Imperial Oil (NYSEAMERICAN:IMO) operates in multiple components of the hydrocarbon value chain. Primarily, it’s involved in the exploration and production of petroleum products (upstream). It also features a downstream business unit, which deals with refining and marketing. Thanks to geopolitical flashpoints, it wouldn’t be shocking to see IMO stock rise from the implications of supply chain disruptions.
Now, because of Imperial’s strong performance in the charts, IMO doesn’t immediately come across as one of the cheap stocks to buy. However, the company’s valuation relative to sales is very reasonable, trading at 1.14X. In contrast, the average integrated oil and gas company runs a sales multiple of 1.12X. In the prior year, the market accepted a running average of 1.02X.
Where things get interesting is in the projected financials. Covering experts believe that fiscal 2024 revenue could land at $37.96 billion, up 1.9% from last year’s print of $37.25 billion. That doesn’t sound like much. However, global supply chain disruptions could cynically boost demand. If so, the high-side view of $45.15 billion could be in play, making IMO one of the cheap stocks to consider.
PagSeguro Digital (PAGS)
Falling under the financial technology (fintech) realm, PagSeguro Digital (NYSE:PAGS) is an exciting enterprise if you’re into emerging market names. Based in Brazil, PagSeguro offers point-of-sale devices and e-commerce solutions for small and medium-sized businesses. As digital payments gain traction in many parts of the world, PagSeguro may forge a key market position in Brazil and surrounding regions.
Right now, PAGS stock trades at 2.4X trailing-year revenue. That’s a bit higher than the prior year’s running average of 2.01X. However, in the first quarter of this year, the market accepted a multiple of 2.56X. Therefore, a positive catalyst could see PagSeguro rising to its prior valuation. Even better, the underlying infrastructure software industry features a sales multiple of just under 4X.
Looking ahead, analysts anticipate that PagSeguro may post sales of $3.26 billion. If so, that would imply a 4.8% lift from last year’s print of $3.11 billion. In the following year, sales could rise to $3.56 billion. Further, the high-side estimate calls for $3.87 billion, making the already low multiple even more attractive. Therefore, PAGS is one of the cheap stocks to keep on your radar.
Equinox Gold (EQX)
While perhaps the riskiest idea on this list of cheap stocks, Equinox Gold (NYSEAMERICAN:EQX) arguably offers the most potential. Falling under the broader materials ecosystem, Equinox focuses on precious metals. Based in Canada, the company is involved in the acquisition, exploration and development of gold properties, primarily in the Americas.
Fundamentally, a likely dovish pivot in monetary policy could boost the underlying gold price. If that happens, Equinox could see its own demand profile rise. Therefore, the current price-to-sales ratio of 1.77X might not last too long. Yes, it’s a bit of a premium relative to the prior year’s running multiple of 1.51X. However, the gold sector carries an average ratio of 2.63.
Ultimately, though, the biggest catalyst to focus on is the projected growth. By the end of fiscal 2024, analysts are looking for revenue of $1.57 billion. If so, that would imply a 44% growth rate from last year’s print of $1.09 billion. In the following year, sales could soar to $2.32 billion.
Again, the lowly sales multiple probably won’t last.
On the date of publication, Josh Enomoto did not have (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.