7 value stocks to buy with double-digit revenue growth

Investors don't have to sacrifice growth for value with these stocks.

  • By Wayne Duggan,
  • U.S. News & World Report
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The S&P 500 index (.SPX) continued its march higher in September. But underneath the surface, there has been at least a temporary shift in market leadership. After a decade of underperformance, value stocks outperformed the S&P in the first few weeks of September, while growth stocks lagged. While the debate rages on Wall Street as to whether this shift is temporary or an inflection point for value stocks, choosy investors can have the best of both worlds. Here are seven value stocks to buy that have double-digit revenue growth, according to Morningstar.

Carnival Corp.

Carnival (CCL) investors have a unique opportunity to potentially time an excellent entry point into the stock. Carnival shares dropped 3.4% in the three days following the recent attack on Saudi Arabia on concerns higher fuel prices would eat into profits. Assuming the oil market disruption is only temporary, opportunistic Carnival buyers can grab the stock at a discount. Carnival has a forward earnings multiple of 10.5 and grew revenue 11% in the past year. Morningstar analyst Jaime Katz has a “buy” rating and $62 fair value estimate for CCL stock.

Celgene Corp.

Celgene (CELG) is the maker of multiple myeloma and myelodysplastic syndromes treatment Revlimid. Analyst Karen Andersen says Celgene has done an admirable job attempting to build its drug pipeline to diversify away from Revlimid. Anderson says new combinations and indications could provide upside to Revlimid revenue. In the meantime, Revlimid representing 60% revenue share creates potential patent cliff risk for long-term investors. Celgene’s forward earnings multiple is just 8, and the company grew revenue 14.4% in the past 12 months. Morningstar has a “buy” rating and $120 fair value estimate for CELG stock.

Cigna Corp.

Cigna (CI) is one of the largest U.S. managed care organizations and pharmacy benefit managers. Analyst Damien Conover says Cigna shares have traded at a discount to fair value since its $65 billion buyout of Express Scripts in late 2018. A merger that size always comes with risks, but Conover says Express provides opportunities for significant cross-selling and cost reductions. Cigna has a forward earnings multiple of just 8.6, and the Express buyout helped it more than triple its revenue in the past year. Morningstar has a “buy” rating and $231 fair value estimate for CI stock.

Capri Holdings

Capri (CPRI) is the parent company of Michael Kors and the owner of luxury lifestyle brands such as Jimmy Choo and Versace. Analyst David Swartz says rising competition and markdowns by third-party sellers resulted in stalled Michael Kors handbag sales in the U.S. However, he says China represents a long-term growth opportunity given Bain & Company estimates China will make up 50% of the global luxury market by 2025. Despite 11.9% revenue growth in the past year, Capri has a forward earnings multiple of just 5.9, lowest on this list.

Goldman Sachs Group

Investment bank Goldman Sachs (GS) thrived even without higher interest rates. Analyst Michael Wong says Goldman has focused more on its investment management business in recent years, a transition which could ultimately result in a higher valuation. Wong says relatively stable, high-return investment management revenue now accounts for about 20% of total revenue, up from around 12% in 2007. Goldman’s forward earnings multiple is just 8.5, and the company grew revenue 12% in the past 12 months. Morningstar has a “buy” rating and $257 fair value estimate for GS stock.

Marathon Petroleum Corp.

Marathon (MPC) is one of the largest independent petroleum refineries in the U.S., operating 16 refineries and Marathon and Speedway brand gas stations. Analyst Allen Good says Marathon stock is “deeply undervalued,” and its 2018 acquisition of Andeavor should create $1.4 billion in synergies by 2021. Marathon’s diversified business mix and its 3.9% dividend are also appealing. Marathon has a forward earnings multiple of just 8.6, and its Andeavor buyout helped grow revenue 50.1% in the past year. Morningstar has a “buy” rating and $89 fair value estimate for MPC stock.

Royal Caribbean

Royal Caribbean (RCL) is the world’s second-largest cruise line behind Carnival, but Royal Caribbean stock has consistently outperformed Carnival over the past decade. Katz says healthy booking trends position Royal Caribbean to grow its profitability in coming years. He says Royal Caribbean is the gold standard in vacation products and innovation, and the company’s focus on maintaining pricing power should help preserve margins. Katz says aging U.S. baby boomers should serve the cruise industry well in the long term. Despite 20% revenue growth in the past year, Royal Caribbean has a forward earnings multiple of just 10.6.

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