Investors are often too quick to write off a stock, but a bad run doesn't mean the end of the road. Accordingly, we examine three unloved blue chip stocks that should soon resume their long-term growth trajectory, making them great bargains at their currently depressed prices.
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1. American Express Company (AXP - Get Report)
Trading at 13 times forward earnings, payment giant American Express has probably been over-sold, with the stock taking a 23% price drop year-to-date (YTD).
The stock is just a dollar away from its 52-week low, but there's a silver lining to this story. Analysts predict that earnings-per-share (EPS) growth for the next five years should hover around 8% per annum -- largely in sync with the 8.7% upswing witnessed over the last five years.
The company has increased spending in 2015 across a range of business opportunities to reinforce its long-term possibilities. Third-quarter results were healthy in general, exhibiting loan growth, strong card member and merchant acquisitions, historically low levels for write-off rates, disciplined operating expense control mechanisms and the benefits of a strong capital position.
Despite the unabated turbulence across 2015, American Express continued to drive an ROE of around 25%, demonstrating the strength, longevity and durability of its business model.
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2. Deutsche Bank AG (DB - Get Report)
It's easy to conclude that Deutsche Bank AG is in a negative spiral -- the stock has fallen 32% in 2014 and around 4% YTD in 2015.
With the stock now at close to a 52-week low, Deutsche Bank continues to trade at an unbelievable 7.4 times forward earnings. Analysts suggest that co-CEO John Cryan (formerly CFO at UBS Group), is accelerating the speed at which the company's business model will shed its old skin and undergo a large-scale transformation.
Deutsche Bank has faced investor heat for this attempt at rapid evolution; add to this the challenges with its costs and the many complexities of its balance sheet.
However, the company's management is working on an aggressive strategy to eliminate non-performing businesses, exit countries with flagging economies and terminate client relationships that are cost-intensive and incur operating risks. Deutsche Bank seems on the turnaround path, as opposed to many stocks right now that appear doomed to permanent decline.
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3. Wal-Mart Stores Inc. (WMT - Get Report)
E-commerce may be all the rage, but Wal-Mart is where America shops.
Consumers certainly enjoy the hyperactive joys of e-commerce portals, but Wal-Mart's chain of physical stores are here to stay. Currently, though, the stock is near its 52-week lows.
While the ongoing wage increase battle could ultimately add to the company's costs, it could also improve worker productivity. Despite its spate of troubles, a company that delivers over $110 billion in sales, quarter after quarter, can't be written off.
An organization as large as Wal-Mart, with its massive store and employee base, needs time to revive itself. The company has been focusing on its web presence, and has bolstered its technology initiatives. It's also announced a $20 billion share repurchase program. While e-retailers like Amazon and eBay are growing in strength, bringing the fight to the brick and mortar players led by Wal-Mart, the empire that Sam Walton built is striving to improve its customer experience. It's on the path towards architecting greater connections with digital consumers/users while maintaining stringent cost-controls (another Wal-Mart hallmark).
Trading at less than 14 times forward earnings and offering over 3% in dividend yields, this retail giant is a great undervalued buy.
By Chiradeep BasuMallick
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