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Today, I’ll share three undervalued growth stocks to buy in July.
I’ll name these three undervalued growth stocks and explain the factors that led me to conclude they are undervalued. I’ll also explain how these growth stocks have performed in recent years to make them undervalued as of July 2024.
Choosing undervalued growth stocks takes some research and analysis. It’s not just looking at a chart. It means comparing the share price to its intrinsic value. Things like:
- Financial performance.
- How much are the C-suite executives invested?
- Usefulness to society.
- Newly launched projects with a view to the future.
- And more.
Any disparity between the above points and the stock price is an important indicator.
While somewhat subjective, I initially researched nine potentially undervalued stocks and have arrived at three growth stocks that are undervalued right now in July.
These three stocks are undervalued for different reasons, as explained below. It’s better because it casts a wider net in catching the “big fish.” Here they are:
Uber Technologies (UBER)
Source: NYCStock / Shutterstock.com
Uber Technologies (NYSE:UBER) is an undervalued growth stock with an asset-light business model that is attractive to large-scale growth.
In February, Uber announced a $7 billion buyback plan. This means Uber reduces the number of shares outstanding via those buybacks. Why? Because more of their profits can be directly sent back to shareholders via dividends or share buybacks. So, as Uber grows and its cash flow expands, more of the money can be returned to shareholders. Bottom line, this means increasing earnings per share for each investor.
Uber has grown big enough to command a network effect in the industry. Uber has become a verb. You “Uber it” like you “Google it,” and that is a self-generating network effect.
Because millions of users use Uber’s food delivery and ride-sharing apps, unsurprisingly, they’ve both done well as economies have reopened since the lockdowns.
PayPal (PYPL)
Source: Poetra.RH / Shutterstock.com
The next undervalued growth stock on the list is PayPal (NASDAQ:PYPL). PayPal is benefiting from consumer behavior normalizing online. In the past five years, consumer behavior has undergone some never-before-seen changes. First, with the lockdowns when customers spent enormous sums of money online because they couldn’t spend money in person.
As economies reopened, those behaviors shifted. People unleashed pent-up demand for away-from-home experiences such as vacations and eating out. That was bad news for PayPal but good news for investors looking for undervalued growth stocks.
PayPal benefits when consumers are spending more money online. Its app is more helpful to online shoppers. But when people are shopping in person, there is no benefit to use PayPal.
PayPal stock is currently trading at a bottom around $60, down from around $300 during its lockdown highs.
So now that online consumer behavior is normalizing, PYPL will benefit from that trend. At relatively cheap valuations (its forward price-to-earnings ratio of 14.2x), consumer behavior is leaning in PayPal’s favor.
Nvidia (NVDA)
Source: gguy / Shutterstock.com
Lastly, there’s Nvidia (NASDAQ:NVDA). Watching what those in the know do with their stocks is always a good idea. Well, who could be more in the know than the C-suite executives? So let’s see what they’re doing:
The founder and CEO, Jensen Huang, owns 868 million shares of his company, which shows great confidence. That’s just over $1 billion worth.
Likewise, CFO Colette Kress owns 6.43 million shares.
Last week, I made the case for NVDA to be a candidate to sell, but only partially if investors are already looking at a profit. That’s exactly what Huang and Kress did in June in what looked like a response to NVDA’s 10-to-1 stock split. But tellingly, they still hold around 90% of their remaining shares.
Normally, it is wise to wait for a dip before buying a stock, but Nvidia hasn’t been behaving that way. Since pivoting to the AI sector, NVDA has been backing thousands of AI startups in Europe alone, and its growth is not stopping.
On the date of publication, Sam Farnham 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 held a LONG position in NVDA.
Since 2012, Sam has helped investors, traders and wealth seekers with his technical and fundamental analysis of the financial markets and has developed six trading systems during that time. He is always searching for more financial opportunities to share with readers.
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