NEW YORK (Stockpickr) -- With the benefit of hindsight, it's pretty clear that many stocks were overvalued at the height of the dot-com boom. Indeed, some tech stocks quickly shot past the $100 and then the $200 level in just a few quarters and after a subsequent plunge, have never been anywhere near there since.
Even outside of tech, a wide range of stocks soared quite high back then.
(GE), for example, soared from $10 in 1995 to $60 in 2000 and now trades at just one-third of that peak.
Yet even as many stocks trade for lower prices now, the underlying businesses are often more robust than ever.
(only one of them in high-tech) that are now vastly more profitable than they were a dozen years ago. Just as important, these S&P 500 members continue to dominate their industries, sport low P/E multiples, and should be among the leading gainers when a rebounding economy takes the market to fresh heights.
(Please note that we are using 2003/2004 sales and profits as a baseline as that is as far back as our historical data extend.)
Fiscal (July) 2004 Sales: $22 billion
Fiscal 2012 Sales: $46 billion
Fiscal (July) 2004 EPS: 70 cents
Fiscal 2012 EPS: $1.46
It's not clear that telecom equipment giant
ever deserved to be valued at $70 a share, as was the case in early 2000, but the current $19 target seems equally unjustifiable when you consider how much larger Cisco's customer base is these days. What was once a U.S.-focused firm now has a strong presence is dozens of countries.
Yet it's the company's balance sheet that should tell you just how cheap this stock is. Cisco sports a market value of $102 billion, but it has $32 billion in net cash. That yields an enterprise value of around $70 million. When you consider that Cisco has generated at least $8 billion in free cash flow in each of the past six years, you begin to realize that this stock is treated as if it's a utility like
Yet Cisco is a leading-edge technology play, with 60% gross margins, 20% operating margins and return on equity that typically exceeds 15%. Cisco's stock may be broken, but the company is far healthier than you might suspect.
2003 Sales: $166 billion
2012 Sales: $136 billion
2003 EPS: 35 cents
2011 EPS: $1.51
Shares of automaker
have tumbled from a peak of $35 in 1999 to a recent $9. To be sure, auto industry sales have yet to truly recover from the recent deep recession. That helps explain why Ford's revenue base is now lower than it was back in 2003 (though a moribund Europe doesn't help).
Still, even if the sales base has yet to recover, Ford is remarkably more profitable these days. Per-share profits handily exceed $1 these days and could move well north of $2 once the ongoing losses in Ford's European operations start to abate.
When both the U.S. and Europe's economies are healthy -- perhaps several years from now -- analysts think Ford's EPS power could hit $3. Not bad for a $9 stock.
2003 Sales: $6.1 billion
2012 Sales: $7 billion
2003 EPS -$1.66
2011 EPS: 99 cents
, the nation's second-largest ad agency, has felt the effects of an anemic advertising market as a number of publishers and other media firms shrink in size. Even with those top-line pressures, the company has managed to turn around its bottom line in remarkable fashion. Back in 2003, this company lost $640 million (and wouldn't go on to turn a profit until 2007).
Yet a tight focus on costs has helped Interpublic to boost operating profit margins for seven straight years, to a recent 9.8%. That helped net income reach a record $520 million in 2011. Meanwhile, shares, which managed to surpass $50 in 1999 and were still above $30 by 2002, now trade for around $11.
The current forward P/E multiple of around 11 is quite reasonable when you consider this company's strong industry positioning and leverage to an eventual rebound in the economy and ad spending.
2003 Sales: $5.9 billion
2012 Sales: $15.7 billion
2003 EPS: 54 cents
2011 EPS: 43 cents
was a mere upstart when the dot-com boom was in full swing. These days, its route network -- and sales base -- are far more expansive, but profits have recently lagged. Earnings per share in 2011 were actually about 20% lower in 2011 than they were back in 2003, in large part because jet fuel prices are now so much higher.
Yet analysts spy a profit rebound, anticipating EPS to rise to 75 cents this year and around $1 in 2013. Stable fuel prices and fuller planes get the credit for the profit pick-up.
Shares, which routinely traded hands in the $15 to $20 in the first half of the last decade, are now under $9, implying a quite low forward multiple.
2003 Sales: $32.5 billion
2012 Sales: $72.2 billion
2003 EPS $1.13
2011 EPS: $2.64
You've likely noticed that there are a lot more drugstores in your neighborhood than there were a decade or two ago. For many consumers, short trips to the grocery store have been replaced by trips to the druggists, which now stock many items a grocer would anyway.
, which operates 7,900 drugstores across the U.S, has been a clear beneficiary of the trend. Sales, operating cash flow and net profits have all risen in lockstep over the years, hitting record levels in 2011. Yet shares, trading at a recent $35, are actually the peaks seen a decade ago. That's because investors fret that growth will invariably slow as the drugstore sector get saturated.
However, Walgreen still has a few arrows left in its quiver: The company should continue to benefit from the ongoing migration towards generic drugs (which carry higher profit margins for drugstores). And this is an industry that continues to consolidate: management aims to keep profits growing through the pursuit of accretive acquisitions.
Shares, which traded for 35 times trailing earnings back in 2003 now trade for a much more reasonable 13 times trailing earnings.
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