Think of it as a Wall Street plot twist. While market darlings like the Magnificent 7 have been in the spotlight, many undervalued stocks with strong fundamentals are relegated to the bargain bin. These companies, many of them household names, possess solid fundamentals and are potentially poised for a comeback soon.
These are three undervalued breakout stocks, each potentially redefining your portfolio’s performance this summer.
Bristol-Myers Squibb (BMY)
Pharma heavyweight Bristol-Myers Squibb (NYSE:BMY) is known for its blockbuster cancer treatments, such as Opdivo and Revlimid, and has long been a favorite among healthcare investors. However, recent challenges and a declining stock price have some wondering: Is BMY a bargain buy or value trap?
In the first quarter BMY reported a respectable 6% year-over-year increase in revenues of $11.9 billion. Yet, a net loss per share of $4.40 raised eyebrows. This was largely attributed to increased operating expenses and a one-time charge related to acquisitions. Recently, BMY has acquired Karuna Therapeutics, RayzeBio, Mirati Therapeutics, and SystImmune to strengthen its position and diversify its portfolio.
Meanwhile, impending patent expirations for key drugs like Eliquis and Opdivo present near-term challenges. However, BMY’s robust pipeline, including recent FDA approvals and promising data for Zeposia, a treatment for multiple sclerosis, points toward long-term growth opportunities.
Despite a decline of over 20% in 2024, BMY offers an attractive dividend yield of 5.9%. With a forward price-to-earnings ratio of 5.8x and a price-to-sales multiple of 1.8x, the stock appears undervalued compared to its historical average. Analysts are also optimistic and have a 12-month median price target of $53.75. Such a move would imply an upside potential of over 34% for BMY shares.
Magna International (MGA)
Next on our list of undervalued breakout stocks is Magna International (NYSE:MGA), a Canadian mobility tech firm carving its niche in the evolving auto parts industry. It supplies global automakers with a wide range of products, from body structures to advanced electronics.
Yet, the company’s first quarter results were a mixed bag. Revenue rose 3% from a year ago to $11 billion, thanks to robust demand for electric vehicle parts. However, adjusted earnings per share fell short of expectations at $1.08, compared to $1.15 a year earlier. The company’s shares came under pressure after management cut its full-year sales forecast amid broader sectoral challenges from supply chain disruptions, labor shortages, and fluctuating EV demand.
Nevertheless, Magna recently secured a contract to supply a reconfigurable seating system to a Chinese original equipment manufacturer, highlighting its research and development capabilities and adaptability to consumer trends. With a presence in 28 countries and a broad customer base, Magna is equipped to leverage the burgeoning $660 billion auto parts market, projected to expand at close to a 4% compound annual growth rate until 2034.
Despite a 28% decline in price so far 2024, MGA offers a robust 4.5% dividend yield. The shares are trading at 7.1x forward earnings and an attractive 0.3x sales. Analysts project a 12-month median price forecast of $58, indicating a potential upside of more than 36% for MGA stock.
Medtronic (MGA)
The last name on our list of undervalued breakout stocks is Medtronic (NYSE:MDT). The Ireland-based company develops device-based treatments for healthcare systems worldwide. Medtronic’s heart devices unit is currently its biggest revenue driver.
Despite facing challenges from supply chain disruptions and inflationary pressures, MDT reported a 5.4% organic revenue growth to $8.6 billion in the fourth quarter of fiscal year 2024. However, diluted EPS decreased to $1.46, down 7% from the previous year. The company’s bearish stance was mainly due to growing global trade relations complications between the U.S. and China, which could impact its operational revenues from China.
Medtronic’s focus on artificial intelligence (AI) innovation could be a significant growth driver. At the GI Genius Summit, the company introduced its ColonPRO software. The company also partnered with Modernizing Medicine (ModMed) to streamline endoscopic care workflows, underscoring its dedication to advancing gastroenterology through AI innovation.
Despite a 7% decline in its stock price this year, Medtronic remains committed to shareholder value, offering a 3.6% dividend yield. The shares change hands at 14.5x forward earnings and 3.2x sales. Wall Street analysts project a potential 23% upside in MDT stock, setting a 12-month median price target at $95.
On the date of publication, Tezcan Gecgil 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.
Tezcan Gecgil, PhD, began contributing to InvestorPlace in 2018. She brings over 20 years of experience in the U.S. and U.K. and has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Publicly, she has contributed to investing.com and the U.K. website of The Motley Fool.