The S&P 500, which serves as a benchmark for the U.S. stock market, often hides undervalued gems overlooked by the market. These stocks trade below Wall Street price targets, offering investors a chance to capitalize on potential upside.
Therefore, I have highlighted three such S&P 500 undervalued stocks, namely, Comcast Corporation (CMCSA), Elevance Health, Inc. (ELV), and HCA Healthcare, Inc. (HCA), that have more than 20% potential upside.
Now, one might question how one knows which stock is undervalued. Undervalued is a financial term referring to a security selling in the market for a price below the investment's true intrinsic value. Key metrics such as price-to-earnings (P/E) and price-to-book (P/B) ratios often signal undervaluation. The stocks trading at a discount to their historical averages or peers could indicate potential upside.
Undervalued stocks are spread across various sectors, including technology, healthcare, and consumer staples. The S&P 500 is one of the most stable Wall Street indexes. The index has an average yearly return of 10.6% over the past 100 years. Furthermore, Goldman Sachs predicts another 10% return in 2025.
For long-term investors, these undervalued S&P 500 stocks present an opportunity to build positions in fundamentally strong companies that can provide stability and growth potential. Given these favorable trends, let’s analyze the fundamental aspects of the CMCSA, ELV, and HCA to understand them better:
Comcast Corporation (CMCSA)
CMCSA is a global media and technology company. The company operates through five segments: Residential Connectivity & Platforms; Business Services Connectivity; Media; Studios; and Theme Parks.
On December 11, CMCSA announced that it signed an agreement to acquire Nitel, a U.S. managed services provider, from an international private equity firm in Cinven. This acquisition will help enhance CMCSA’s ability to serve enterprise clients and strengthen its capacity in advanced network, cloud, and cybersecurity solutions.
In terms of forward non-GAAP P/E, CMCSA is trading at 9.41x, 32.6% lower than the industry average of 13.96 x. Likewise, the stock’s forward EV/EBITDA and Price/Cash flow multiples of 6.49 and 5.68 are 18.4% and 34.1% lower than their respective industry averages of 7.95 and 8.62.
For the nine-month period, which ended on September 30, CMCSA’s revenue increased marginally year-over-year to $91.82 billion. The company reported adjusted net income of $13.24 billion, and its adjusted EPS came in at $3.37 per share, reflecting increases of 1.2% and 7.7% year-over-year, respectively.
The consensus revenue estimate of $31.64 billion for the fiscal fourth quarter (ending December 2024) represents a marginal increase year-over-year. The consensus EPS estimate of $0.87 for the same quarter indicates a 3.1% improvement year-over-year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has surged 5%, closing the last trading session at $40.24.
The 12-month median price target of $49.33 indicates a 22.6% upside potential from the last closing price. The price targets range from a low of $42 to a high of $60.
CMCSA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CMCSA has a B grade for Value, Stability, and Quality. It is ranked first out of seven stocks in the Entertainment - TV & Internet Providers industry. Click here to see the additional ratings for CMCSA (Growth, Momentum, and Sentiment).
Elevance Health, Inc. (ELV)
ELV operates as a health benefits company or health insurer in the United States. It operates through four segments: Health Benefits; CarelonRx; Carelon Services; and Corporate & Other. The company supports consumers, families, and communities across the entire care journey, connecting to the care, support, and resources to lead healthier lives.
On October 15, the company announced a quarterly dividend of $1.63 per share, payable on December 20, 2024. With 13 years of consecutive dividend growth, ELV pays an annual dividend of $6.52, which translates to a yield of 1.69% at the prevailing price levels. Its four-year average dividend yield is 1.13%. The company’s dividend payments have grown at a CAGR of 13% over the past three years and a 15.3% CAGR over the past five years.
In terms of forward GAAP P/E, ELV is trading at 14.24x, 51.4% lower than the industry average of 29.30x. Likewise, the stock’s forward EV/Sales and Price/Sales multiples of 0.62 and 0.51 are 82.9% and 86.4% lower than the industry averages of 3.65x and 3.75x, respectively.
In the fiscal nine-month period that ended on September 30, 2024, ELV’s total revenues increased 2.2% year-over-year to $131.57 billion. The company’s adjusted operating gain rose 2.8% from the same period last year to $8.29 billion. Its adjusted net income came in at $6.81 billion, up 4% year-over-year, while its adjusted EPS grew 6% from the year-ago value to $29.14.
Analysts expect ELV’s revenue and EPS for the current year (ending December 2024) to be $175.11 billion and $32.97, respectively. For the fiscal year 2025, its revenue is expected to increase 7.1% year-over-year to $187.56 billion, while its EPS is forecasted to settle at $35.26, indicating a 6.9% improvement over the prior year.
Shares of ELV have declined marginally intraday to close the last trading session at $378.39.
Based on Wall Street analysts offering 12-month price targets for ELV in the last three months, the average target price is $520.92, indicating a 37.7% change from the last price.
ELV’s POWR Ratings reflect this robust outlook. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has a B grade for Value. The stock is ranked #5 out of 10 stocks in the A-rated Medical - Health Insurance industry. Click here to access the additional ELV ratings (Growth, Momentum, Stability, Sentiment, and Quality).
HCA Healthcare, Inc. (HCA)
HCA is a healthcare services company that owns and operates hospitals and related healthcare entities in the United States. It operates general and acute care hospitals offering medical and surgical services, including inpatient care, intensive care, diagnostic, emergency, and outpatient services.
On October 25, buoyed by strong financial performance, the company declared a quarterly dividend of $0.66, payable on December 27, 2024. HCA pays an annual dividend of $2.64, which translates to a yield of 0.84% at the prevailing price levels. Its four-year average dividend yield is 0.73%. Moreover, the company’s dividend payments have grown at a CAGR of 11.2% over the past three years.
In terms of forward non-GAAP P/E, HCA is trading at 14.36x, which is 31.8% lower than the industry average of 21.05x. The stock’s forward EV/EBITDA ratio of 8.99x is 32.1% below the industry average of 13.25x. Also, its forward Price/Sales multiple of 1.13 compares to the industry average of 3.75x.
HCA’s revenues for the third quarter (ended September 30, 2024) increased 7.9% year-over-year to $17.49 billion. Its adjusted EBITDA is $3.27 billion, indicating a 13.4% growth from the prior year's quarter. The company’s attributable net income came in at $1.27 billion, up 17.7% year-over-year. Also, its adjusted net income attributable grew 25.3% from the same period last year to $4.90 per share.
Street expects HCA’s revenue for the fiscal fourth quarter (ending December 2024) to increase 5.4% year-over-year to $18.23 billion. Its EPS for the same period is expected to register a 4.4% growth from the prior year, settling at $6.16. In addition, it surpassed the consensus revenue and EPS estimates in three of the trailing four quarters, which is promising.
The stock has gained 19.1% over the past year to close the last trading session at $311.99.
Based on Wall Street analysts offering 12-month price targets for HCA in the last three months, the average target price is $408.31, indicating a 30.9% change from the last price, with a high forecast of $460 and a low forecast of $320.
It’s no surprise that HCA has an overall rating of B, equating to a Buy in our POWR Ratings system. It has a B grade for Value, Stability, and Quality. Out of 10 stocks in the B-rated Medical - Hospitals industry, HCA is ranked #3.
Beyond what is stated above, we’ve also rated HCA for Growth, Momentum, and Sentiment. Get all HCA ratings here.
What To Do Next?
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CMCSA shares were trading at $39.89 per share on Friday afternoon, down $0.35 (-0.87%). Year-to-date, CMCSA has declined -6.30%, versus a 28.06% rise in the benchmark S&P 500 index during the same period.
About the Author: ShreyaRathi
