It is at least hard for me to believe that it is almost a year since the pandemic crashed on the stock market in March 2020. The market has recovered since the lows, and smart investors have taken the opportunity to grab shares of large companies pumped along with the broader market. But because the stock market is already at a record high, it does not look like there are too many bargains left.
Many large companies have seen their share prices rise, even though sales have not fully recovered. For example, DisneySales fell by 22% in the first quarter of 2021, but the share price is 44% higher than a year ago.
And ‘buy’ does not always mean cheap. There are many struggling businesses with cheap stocks, which do not make bargains, but rather pitfalls.
But here are two solid companies whose shares do not underperform their overall business and can still be bought at cheap prices.
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Old business, new management
Lowe’s (NYSE: LOW) opened its first store in 1921, but it consistently plays a second violin for the home improvement leader Home Depot, which has only existed since 1978.
The second-place venture appointed Marvin Ellison as CEO in 2018, and it progressed in time for the pandemic. It outperformed its main competitor, with a 30% increase in the third quarter ended October 30th.
Shortly before the pandemic, Lowe invested heavily in its digital infrastructure, and digital sales grew 106% in the third quarter. The company also focuses on its pro business, and the companies have grown by more than 20% in this segment.
The company expects sales growth to slow as coronavirus vaccines are rolled out and people start spending their money elsewhere, but the new and improved digital program should drive sales. Digital accounts for only 7% of total sales, and Lowe’s has made further investments in its supply chain over the past few months, including opening fulfillment centers and distribution centers to handle digital orders. It is also refurbishing the set-up of stores to be project-driven instead of product-driven, which, according to Ellison, will provide a more intuitive shopping experience for customers and especially benefits.
Lowe’s in the exclusive club Dividend Kings, which means he has increased his dividend annually for more than 50 years. It is not a very high yield of 1.32%, but it is growing constantly and stably. Lowe’s share has risen 80% over the past three years, trading at a reasonable 24 times overdue earnings. But sales and earnings are likely to continue to grow, as will the share price.
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Old company, new business
American Express (NYSE: AXP) has been around since 1850, but it has modernized with technology to feed its uncompromising commitment to customer service.
Revenue fell during the pandemic and fell by 29% in the second quarter, and the company performed worse than similar companies, as customers usually spent a large amount on travel and entertainment, which declined during closures. T&E accounted for 28% of total spending in the fourth quarter of 2019, but only 12% in Q4 2020.
On the other hand, the more affluent customers can still afford to spend in difficult circumstances, and non-T&E spending has already exceeded pre-pandemic levels. Revenue improved to 18% in the fourth quarter ended December 31, and American Express generated revenue for the full year, including $ 1.76 in the fourth quarter, a 13% year-over-year decline.
The financial services business, known for its credit cards, also offers small business solutions to merchants, including digital solutions through its financial technology platforms. Its cards have won numerous awards, and customers have paid $ 1.2 billion in annual fees for the privilege of carrying an American Express card in the fourth quarter, an increase of 13% year-over-year to 13% of the cards. total income.
It intends to see high growth as the pandemic subsides and customers take care of their pent-up travel journeys. It may take a while, but that’s why the stock is currently a bargain.
American Express maintained its dividend throughout the pandemic, which also delivered 1.32%. The share price has risen 35% over the past three years, and the shares are trading 35 times behind the twelve-month earnings, which is not very cheap. But the price reached new heights just before the pandemic flattened it, and if the business recovers, it should rise to new heights again.