Stocks to buy

The stock market has rallied meaningfully in recent weeks. And while the macroeconomic outlook remains challenging, investors have started 2023 with a more optimistic posture. As such, there aren’t quite as many dirt-cheap stocks today as there were last fall. However, there are still bargains out there for investors that are willing to do some sleuthing. These seven stocks to buy at a discount still offer strong value at today’s prices.

That’s not just my opinion, either. Morningstar Research views all seven of these stocks as at least 19% undervalued today, and in some cases, much more than that. As such, these picks offer significant upside as sentiment improves.

ROP Roper Technologies $429.02
VZ Verizon $38.84
GPN Global Payments $112.78
BR Broadridge Financial $140.74
EMN Eastman Chemical $85.43
WRK Westrock $31.59
EFX Equifax $202.94

Roper Technologies (ROP)

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Roper Technologies (NYSE:ROP) is a conglomerate firm focused on software solutions for less glamorous markets. Roper owns software solutions for fields such as power plant management, K-12 school operations, life insurance, law firms, and so on.

This isn’t as exciting as software for consumer-facing applications. However, Roper can buy software for these niche verticals at significantly lower valuations than it would pay in more competitive industries. Indeed, Roper pivoted naturally. Decades ago, it made industrial equipment in fields such as pumps. Over time, management figured out it was more profitable to sell software and services rather than hardware, and the company changed its name from Roper Industries to Roper Technologies to reflect this evolution.

The other upside of Roper is that shares are significantly cheaper than most pure-play software companies. ROP stock is selling for just 26 times forward earnings, which isn’t bad for a company with a double-digit annualized earnings per share growth record dating back to the 1990s. And, with tech currently in a downturn, Roper should find more M&A targets at a reasonable price. Speaking of reasonable price, Morningstar believes Roper shares are worth $530, whereas they trade in the low $400s today.

Verizon (VZ)

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Verizon (NYSE:VZ) is one of the three primary wireless carriers in the United States. Investors have traditionally gravitated to this industry due to its stability. Phone companies have been known for strong cash flows, large dividends, and being safe havens in market storms.

This view, however, came under fire thanks to rival AT&T (NYSE:T). That company was forced to slash its dividend after a series of misguided acquisitions left it with way too much debt.

Verizon got caught up in the backlash. Investors dumped other telecoms, including VZ stock, in the wake of AT&T’s struggles. But that’s a mistake. Verizon has a stronger balance sheet, a better network, and a more capable track record of investments and capital allocation.

Recently, Verizon’s results have come up a little short of expectations. The company has been in a long investment cycle rolling out 5G and other network improvements. However, Verizon should soon see the benefits of these outlays. Meanwhile, shares are trading for just 8x forward earnings and offer a 6.7% dividend yield. Morningstar sees VZ stock as 32% undervalued today.

Global Payments (GPN)

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Global Payments (NYSE:GPN) is a merchant acquirer. This is a financial services business that serves as an intermediary between credit card companies and retailers. Global Payments provides payment terminals to stores and helps with payments, accounting, fraud monitoring, and other related services. Global Payments has also moved into solutions for online payments and omnichannel retailers.

The payments sector has had an absolutely awful 18 months or so, with many leading companies in the sector losing half their value or more. In many cases, those drops were justified. However, Global Payments has gotten caught up indiscriminately in the selling.

The firm continues to grow; in fact, analysts expect profits to rise 11% this year, and increase another 14% next year. That’s pretty incredible, given that Global Payments is selling at just 11 times earnings today. It’s quite an unusual bargain to see a firm with healthy top-and-bottom-line growth like this selling at such a low P/E ratio. Morningstar believes that GPN stock is worth $186 per share; with the stock at $112 today, that makes it 40% undervalued now.

Broadridge Financial (BR)

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Broadridge Financial (NYSE:BR) is another financial services company. It focuses on providing back-office support to brokerages, wealth management firms, and other similar businesses.

Broadridge came about as a spin-off from the human resources management company Automatic Data Processing (NASDAQ:ADP). Broadridge originally focused on providing proxy services. That is to say, the shareholder communications and voting functions for publicly-traded companies. Broadridge retains a market share north of 90% in the proxy business.

Lately, it has branched out into other niches such as providing software and support for wealth managers, private family offices, and other similar roles. The move from paper documentation to digital solutions has given Broadridge a wide opportunity set to help firms modernize their operations.

Broadridge shares have pulled back from a high of $180 to $141 over the past year. This marks a strong value. Shares are at 20 times forward earnings, and analysts forecast high single digits earnings growth going forward. Morningstar estimates a fair value of $185 for BR stock, making shares 24% undervalued today.

Eastman Chemical (EMN)

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Eastman Chemical (NYSE:EMN) is a specialty chemical company. It came about as a spin-off from former photography giant Eastman Kodak way back in 1993. While Kodak has faded from view, its chemical business subsidiary has grown into quite a thriving enterprise. Indeed, since the 1993 spinoff, EMN stock has delivered an 800% total return, including dividends.

Many investors dismiss chemicals as a commodity business with low-profit margins and which is prone to booms and busts. That is true in many cases. However, Eastman has specialized in many niche and specialty chemical products where it’s easier to maintain a competitive moat. Some of these are quite forward-looking, as well. For example, Eastman presented at the 2021 Consumer Electronics Show “CES” where it showed off its solar films and also augmented reality heads-up display interlayers, among other products.

Eastman has also been incredibly friendly to shareholders. It has bought back mountains of stock, reducing its share count from 160 million in 2013 to 120 million today. Thanks to Eastman’s current low P/E ratio, its buyback is able to retire stock at an even faster clip; the company has repurchased 15 million shares of its stock just since 2021. Pretty amazing stuff.

Today, shares are going for less than 11 times forward earnings. And, in addition to the huge buyback program, Eastman also offers a generous 3.7% dividend yield. Morningstar sees EMN stock as 36% undervalued today.

WestRock (WRK)

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WestRock (NYSE:WRK) is an industrial company that primarily makes boxes, cartons, corrugated packaging, and other such solutions. WestRock is a large-scale player, with leading positions in markets such as containerboard. This gives the company a competitive edge despite the low margins and cutthroat pricing often seen in the industry.

WestRock’s profitability was negatively impacted during the early waves of the recent inflationary spiral. The price of lumber, and by association paper products, soared amid shortages. However, this reversed in 2022 with the prices of lumber and paper goods crashing. This should have a favorable effect on WestRock’s profits going forward.

Now, however, investors are worried about potentially falling demand for packaging. We’ve seen rising inventories in some consumer product categories, such as apparel, as last year’s consumer spending boom starts to fade. However, WRK stock seems to have overreacted. Shares are down 29% over the past year, leaving shares at just 10 times forward earnings. The stock also yields 3.5%.

Equifax (EFX)

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Equifax (NYSE:EFX) is one of America’s three primary credit reporting agencies. The company was hit with a massive reputational blow due to its 2017 data breach incident. However, the company has remediated the losses caused by that event and made large moves in cybersecurity to avoid a repetition of that event.

In addition, Equifax nowadays is much more than just consumer credit services. In recent years, Equifax has pushed hard into workforce solutions. Think of things such as income verification, tax forms, and unemployment insurance processing. It continues to broaden its business, such as via its 2021 purchase of Kount, which is a firm that combats e-commerce fraud using artificial intelligence.

EFX stock hit almost $300 per share in 2021. Now shares are trading below $200. Traders have dumped shares on fears of a recession and resultant slowdown in consumer credit usage. In addition, Equifax’s income verification services are often used for the mortgage market, so the rise in interest rates hurts volumes there.

However, the sell-off appears to be overdone. Equifax is a secular growth story with several appealing divisions within the business. Even a potential recession shouldn’t slow down Equifax too much. Morningstar’s Rajiv Bhatia believes shares are worth $315 each, meaning that Equifax is 36% undervalued today.

On the date of publication, Ian Bezek held a long position in EMN, BR, GPN, ROP, and VZ stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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