Red numbers are usually never a happy sign, especially after you have acquired a significant position in certain publicly traded companies. Nevertheless, cheap stocks also offer a long-term opportunity for forward-thinking speculators. It takes discipline to take the losses and not be discouraged by volatility. But if you choose the right ideas, the immediate inconveniences can lead to long-term benefits.
Of course, picking the right ideas is easier said than done. For retail investors, it’s important to largely ignore the noise surrounding nominally cheap stocks. Of course, buying something for a few dollars a share may be psychologically satisfying, but you want to buy quality stocks at bargain prices. Otherwise, those cheap securities can get even cheaper.
In this list of intriguing ideas, we’re only dealing with analyst-approved ideas. If the experts don’t like them, there may be fewer reasons to be against them. More importantly, these companies are poised for future growth; in other words, we’re probably dealing with legitimate discounts. With that in mind, below are cheap stocks to consider.
Imperial Oil (IMO)
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As part of the integrated oil and gas industry Imperial Oil (NYSEAMERICAN:IMO) operates in several areas of the hydrocarbon value chain. Primarily, the company is involved in the exploration and production of petroleum products (upstream). It also has a downstream business unit that deals with refining and marketing. Due to geopolitical hot spots, it would not be surprising to see IMO stock rise due to the impact of supply chain disruptions.
Due to Imperial’s strong performance on the charts, I don’t think Imperial necessarily appears to be one of the cheap stocks to buy. However, the company’s valuation relative to sales is very reasonable at 1.14X. In contrast, the average integrated oil and gas company is at a sales multiple of 1.12X. Last year, the market accepted a moving average of 1.02X.
Things get interesting when it comes to the forecast financial numbers. Experts expect revenue in fiscal 2024 to be $37.96 billion, up 1.9% from last year ($37.25 billion). That doesn’t sound like much. However, disruptions to global supply chains could cynically boost demand. If that’s the case, the high forecast of $45.15 billion could come to fruition, making the stock one of the cheap stocks to consider in my opinion.
PagSeguro Digital (PAGS)
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Falling into the area of financial technology (Fintech), PagSeguro Digital (NYSE:PAGS) is an exciting company to follow if you’re interested in emerging market names. Brazil-based PagSeguro provides point-of-sale devices and e-commerce solutions for small and medium-sized businesses. With digital payments gaining traction in many parts of the world, PagSeguro could take on a major market position in Brazil and surrounding regions.
Currently, PAGS stock is trading at 2.4 times last year’s sales, slightly higher than the year-ago average of 2.01. However, in the first quarter of this year, the market accepted a multiple of 2.56. A positive catalyst could therefore see PagSeguro rise to its previous valuation. Even better, the underlying infrastructure software industry has a sales multiple of just under 4.
Looking ahead, analysts expect PagSeguro to report revenue of $3.26 billion, up 4.8% from last year’s $3.11 billion. In the following year, revenue could rise to $3.56 billion. Moreover, the highest estimate is $3.87 billion, which makes the already low multiple even more attractive. Therefore, PAGS is one of the cheap stocks to keep an eye on.
Equinox Gold (EQX)
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Although this may be the riskiest idea on this list of cheap stocks, Equinox Gold (NYSEAMERICAN:EQX) arguably offers the greatest potential. Equinox is part of the broader materials ecosystem and focuses on precious metals. The Canada-based company is involved in the acquisition, exploration and development of gold deposits, primarily in North and South America.
Fundamentally, a likely dovish turn in monetary policy could boost the underlying gold price. If that happens, Equinox could see a surge in its own demand. Therefore, the current price-to-sales ratio of 1.77X may not last too long. Yes, it is a small premium compared to last year’s running multiple of 1.51X. However, the gold sector has an average ratio of 2.63.
The biggest catalyst to focus on, however, is projected growth. By the end of fiscal 2024, analysts expect revenue to reach $1.57 billion. If true, that would represent a growth rate of 44% from last year’s $1.09 billion. The following year, revenue could rise to $2.32 billion.
And here too, the low sales multiple ratio is unlikely to last.
At the time of publication, Josh Enomoto had no position (either directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing guidelines.
At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.
