After the bloodbath across capital markets at the start of this year, oil prices and the S&P 500 are recovering from the pain.
However, there are some stocks which have taken it harder on the chin and have yet managed to stage a better recovery.
With encouraging analyst ratings, inexpensive valuations, and potential for superior earnings growth for at least the next five years, these lesser known undervalued gems are set to be growth stock winners this year.
So far, improving margins than previous quarter, lower costs and the acquisition of BNS (Broadband Network Solutions), which positively impacted the Connectivity and Mobility sales segment, have helped the company regain some lost ground.
Going forward, the Mobility business, which is facing headwinds by way of lower spends by wireless operators, is expected to recover soon, as emerging markets will continue to demand wireless coverage and demand for mobile broadband in developed economies is intact.
Further, gross and operating margins are expected to receive a boost as cost synergies from the BNS integration kick in.
The company has a good track record of either meeting or beating analysts' expectations on earnings at least over the last four quarters. Analysts expect the company to grow earnings at nearly 18.45%, far outpacing the industry's run rate of 15.26%. Even in terms of valuations, at a price-to-earnings ratio (P/E) of 12%, the company is trading at a steep discount to the industry P/E of 23.37. If you're looking to build wealth, this little-known equity is a smart choice.
HD Supply is a large industrial distributor that serves contractors, government-related organizations, homebuilders, and industrial suppliers. The company, which was spun off from Home Depot in 2007 sells equipment such as pipes, fasteners, valves, and plumbing, electrical and building supplies, so it already boasts scale.
While the U.S. economic recovery since the Great Recession of 2008 has been in fits and starts, the housing market, which was in the eye of the storm, has shown steady improvement.
U.S. pending home sales in April showed a way better-than-expected improvement of 5.1% and new home sales also sprang to an 8-year high. So, as the demand for homes picks up, the requirement for supplies would also rise, working in favor of HD Supply.
Analysts expect stellar growth from the company in terms of earnings over the next five years as the recovery gains pace. At 35.27% annually for the next half a decade, HD Supply can far outperform the industry's 14% figure but is priced on par with the industry at a P/E of a little over 13.
Colorado-based Arrow Electronics the second largest distributor of electronic components in the world.
The company is poised to gain from the expansion of Internet of Things (IoT), with the IoT device market poised to grow to over double the combined market size of smartphones, PCs, tablets, connected cars, and wearables combined. The company will make the most of the IoT market through strategic initiatives such as its partnership with crowdfunding platform Indiegogo to stimulate disruptive innovation.
It is also making progress with its semi-autonomous motorcar (SAM), ushering in the next leg of innovation and growth in the booming technology space.
After stumbling at the start of the year to $45 levels, Arrow has gained 41% since then. Further, analysts from Goldman Sachs have maintained a "Buy" rating on the stock and Bank of America has initiated coverage with a "Buy" rating.
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