Affordable Shares That Have Remained Undervalued for Over Three Years Straight: Are They Smart Investments Now?
When a stock reaches prices not seen in years, it can be tempting to think it's a steal. But remember, stocks don't plunge without reasons. Companies grappling with challenges might be trading at low prices, but investors should weigh the risks against potential rewards.
Here are three companies with stocks trading near multi-year lows: Hershey, PepsiCo, and Moderna. Are they worth the risk, or should you steer clear?
Hershey
Hershey, the candy giant, is trading at prices last seen back in 2021. This drop in price has been accompanied by a drop in sales and earnings, with revenues declining by more than 2% and earnings falling by 6% over the first nine months of 2024. The company's battling higher cocoa prices and a challenging macroeconomic environment, as consumers tighten their purses on discretionary purchases.
Despite the struggles, Hershey remains an attractive play for income investors. As of now, it's trading at 18 times its trailing earnings, yet its payout ratio is still around 60%. The high-yielding dividend of 3.6% is safe and could entice patient investors looking for income. Plus, with top brands like Reese's and Twizzlers on its roster, Hershey may be a solid long-term investment.
PepsiCo
Food and beverage giant PepsiCo is also feeling the effects of a slowing market. For the 36 weeks ending Sept. 7, 2024, the company's net revenue was up 0.7% year over year, while earnings per share saw a 4% increase. However, PepsiCo's volumes have been declining, which has offset the impact of price increases.
PepsiCo is more expensive than Hershey, trading at 22 times its trailing earnings, but it's a Dividend King, having increased its dividend for 52 consecutive years. With a high-yielding payout of 3.7%, it might be an appealing option for buy-and-hold investors aren't deterred by its current valuation.
Moderna
Biopharmaceutical company Moderna has essentially given back its pandemic-era gains. Now trading at around the prices it was at in April 2020, it's a stark contrast to the prices investors would have paid to own shares of Moderna at the start of its pandemic-related success.
With COVID-related sales on the decline and Moderna's future unclear, it's hard for investors to determine its true value. Trading at a market cap of $13 billion, there's plenty of room for downward pricing pressure. Moderna has already reduced its guidance and is in cost-cutting mode, attempting to improve its financial situation.
Conclusion
Investing in stocks near multi-year lows can be risky, but it may also yield substantial returns if the company turns things around. Hershey, PepsiCo, and Moderna present unique opportunities, with pros and cons to weigh. By evaluating each company's strengths, weaknesses, and outlook, investors can make informed decisions about whether to buy or ignore these stocks.
In light of the challenges facing Hershey, some investors might choose to invest their money in the company's high-yielding dividend, considering its attractive valuation and strong brand portfolio. However, it's crucial to consider the risks associated with the company's declining revenue and earnings.
Given PepsiCo's current valuation and its status as a Dividend King, some investors might decide to invest their money in the company, drawn by its history of dividend increases. However, investors should also take into account PepsiCo's declining volumes and slower net revenue growth.
