As investors, it can be very easy to get caught up in the moment or in the short term. You may see stocks going up hundreds of percent and feel like you missed out. This may make you want to buy in to catch the short-term rally. However, this can be quite risky since the stock has risen so much, it might not have much of a rally left and you risk having bought in at the top.
This is why it is important to consider investing for the long term. The emotions and random fluctuations of the market balance out over the years and prices over the long run are usually based on strong company performance and earnings growth. And we have done the work for you and found three companies that are likely undervalued and set to soar over the next 5-10 years.
DocuSign (DOCU)
DocuSign (NASDAQ:DOCU) is a company that offers software products for customers to enable them to use online signatures. This allows for easier approvals of documentation and streamlines processes for customers. The stock is up over 5% in the past year and Yahoo Finance analysts have an average one-year price target of $64.83, which is decently above the current price of around $58.80.
Many have believed that this company is no longer worth investing in after the end of the pandemic. However, in the increasingly digital age, the company’s solutions remain relevant with many people still working from home. As such, they have over 1 million customers and over a billion users.
This stock has been quite underestimated as such and trades at great valuations. The stock has a price-to-earnings (P/E) ratio of 20.25x compared to the sector median of 22.50x. This might not seem like much, but this is far below what the stock usually trades for with its five-year average P/E being 164.96x. As such, this puts the stock in a favorable position that investors such consider.
General Motors (GM)
General Motors (NYSE:GM) is a well-established car manufacturer that is at the forefront of the electric vehicle (EV) revolution. The stock is up over 20% in the past year. Yahoo Finance analysts have an average one-year price target of $50.20, which leaves plenty of room to run from the current price of around $43.
The company is heavily investing in the EV industry with plans to invest over $35 billion from 2020 to 2025 in the products of EVs. With this being a rapidly growing industry, the company’s earnings are also set to soar. Analysts expect earnings to grow at over 16.39% year over year for the fiscal year of 2024. As such, earnings per share (EPS) is expected to hit $8.94 by year-end.
Now, the important question is if the company is worth buying into at the current moment. The stock has a phenomenal P/E ratio of 5.91x which is far below the sector median of 14.65x. This provides ample room for the stock to grow assuming a reversion to the mean. As such, investors should strongly consider the stock.
UI Path (PATH)
UI Path (NYSE:PATH) has recently been surging in the AI space as it provides clients with AI-powered automation platforms. Since PATH sells its offerings to a vast variety of industries through a subscription-based model, it has been able to tap into secular trends and gain a stickier customer base. This optimism in PATH has been reflected in their one-year price target, which sits in a range between an average of $24 and a high of $32.
Looking toward the future of AI, PATH has recently made developments in order to solidify its competitive positioning in specifically AI automation. More specifically, PATH has recently introduced products like Autopilot, which have helped automation and organizational development. Its strategic partnerships with software industry leaders will also allow it to enhance its long-term market positioning and open up omnichannel for collaboration and growth.
Financial health-wise, UiPath sits as a stock with virtually no debt on its balance sheet and approximately 7% of its market cap held as cash. With an EV/S ratio of 7.1x sitting relatively discounted to other SaaS companies, PATH sits as a fundamentally sound leader with headwinds into the long-term AI space.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
