The higher the stock market goes, the more difficult it becomes to find value stocks. Fortunately, investors can use screening tools to customize preferences and easily sort through thousands of stocks to find exactly what they’re looking for. We used the U.S. News & World Report stock screener to look for the top undervalued consumer services stocks to buy now. To narrow our search, we looked for stocks with a price-earnings ratio of 15 or less. And to make sure we were earning yield, we screened for stocks that offered at least 1% dividend. Here’s what we found.
Walt Disney Co.
Disney (DIS) is going head-to-head with Netflix (NFLX) with its Disney+ streaming service, which launched on Nov. 12. The company is underpricing the standard Netflix plan by $5 per month and targeting families with its kid-friendly content. Bank of America analyst Jessica Reif Ehrlich says Disney+ has “substantial upside” in the long term, and its Fox buyout will provide $2 billion in synergies by fiscal 2022. Disney shares pay a 1.2% dividend and are up 19% in the past year. Bank of America has a “buy” rating and $168 price target for DIS stock.
Sinclair Broadcast Group
Sinclair (SBGI) is the second-largest owner of TV stations in the U.S. Despite traditional TV headwinds, CFRA analyst Tuna Amobi says Sinclair has several potential bullish catalysts ahead. Retransmission and distribution at scale are growth opportunities. The 2020 election season should be a shot in the arm to the advertising business. Finally, Amobi says the 21 regional sports networks acquired from Disney should provide value. Sinclair shares are up 23.6% in the past year and pay a 2% dividend. CFRA has a “buy” rating and $55 price target for SBGI stock.
Nexstar Broadcasting Group
Nexstar (NXST) is the largest TV station operator in the U.S., and its stations reach nearly 39% of all households. Nextar’s stock price is up 30% in the past year, and investors also enjoy a 1.7% dividend. Wells Fargo analyst Steven Cahall says Nexstar has the highest retransmission rates among broadcasters and is well-positioned to potentially acquire smaller companies. Cahall says management has a track record of strong execution and should continue to navigate the difficult environment. Wells Fargo has a “market perform” rating and $113 price target for NXST stock.
Wendy’s (WEN) is the third-largest U.S. fast-food hamburger restaurant chain. Bank of America analyst Gregory Francfort says Wendy’s third-quarter numbers were solid, but its push into breakfast remains a show-me story. Francfort says a return to unit growth will be the most difficult part of Wendy’s aggressive 2020 goals given the saturation and competitiveness in the North American market. Wendy’s shares are up 22% in the past year, and investors can also feast on the stock’s 2.3% dividend yield. Bank of America has a “neutral” rating and $21 price target for WEN stock.
Comcast (CMCSA) is the largest U.S. cable service provider. Comcast was outbid for Fox by Disney in 2018, but it was still able to complete a $39 billion buyout of Sky. Morningstar analyst Michael Hodel says Comcast has done an excellent job supplementing its cable business by growing its broadband business, gaining internet service market share from AT&T (T) and Verizon Communications (VZ). Comcast shares are up 18% in the past year, and the stock also pays a 1.8% dividend. Morningstar has a “hold” rating and $45 fair value estimate for CMCSA stock.
Royal Caribbean Cruises
Royal Caribbean (RCL) is the second largest cruise company in the world. Morningstar analyst Jaime Katz says strong bookings numbers suggest 2020 will be another strong year for Royal Caribbean earnings growth. A stable pricing environment and impressive customer loyalty should also help support that growth, Katz says. She says an aging baby boomer generation will also serve the cruise industry well. Royal Caribbean shares are up 6.3% in the past year, and the stock pays a 2.7% dividend yield. Morningstar has a “buy” rating and $131 fair value estimate for RCL stock.
Nathan’s Famous (NATH) is a global fast food restaurant specializing in its iconic hot dogs. Earlier this month, Nathan’s reported 1.1% revenue growth and 11.9% net income growth in its fiscal second quarter. Nathan’s Famous operates in 16 countries and management recently said the Middle East offers an “incredible opportunity” for international expansion. Nathan’s Famous shares are up just 1.3% in the past year and the stock pays a 1.8% dividend. Nathan’s is the most under-the-radar investment on this list given no Wall Street analysts currently cover the stock.
Brinker (EAT) is the parent company of casual dining chains Chili’s and Maggiano’s Little Italy. Amobi says Brinker's turnaround strategy is starting to show signs of progress. System-wide same-restaurant sales were up 1.6% last quarter. Amobi says most of its same-restaurant sales growth came from pricing increases in a weak environment for customer traffic. Brinker shares are down 4.7% in the past year, but the stock pays the highest dividend among this group of value stocks at 3.3%. CFRA has a “hold” rating and $50 price target for EAT stock.
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