Investing around $5,000? Consider These 3 Growth Stocks Currently Near their Yearly Low Prices.
Investing $5,000 over an extended period can yield substantial returns, especially if you're targeting undervalued stocks with strong growth potential. The stock market's average long-term return hovers around 10%, but by bankrolling a struggling stock that has scope to soar, you could achieve far more impressive results. For instance, if you procure an 15% annual average return over 22 years, a $5,000 investment would swell to an impressive $100,000+.
The stocks listed aren't guaranteed to deliver such returns. However, they are currently trading at discounted prices, making them appealing investment opportunities. Intelligent investors understand that finding such bargains can be challenging in a market that might look relatively pricey overall. Therefore, buying at a discount could lead to substantial upside.
Consider investigating three intriguing stocks, particularly if you're a growth-oriented investor seeking value: Dollar General (DG -1.89%), Nike (NKE -0.91%), and Merck (MRK 0.74%). Here's why these could be engaging buys for your portfolio.
Dollar General
The stock price of discount retailer Dollar General has plummeted an enormous 43% this year. The company cites a "financially constrained" core customer as one reason for its dismal financial performance this year. In the latest quarter (which concluded on Aug. 2), same-store sales increased by a meager 0.5%, while net income tumbled 20% to $374.2 million.
Unsurprisingly, Dollar General's stock hasn't fared well in such dismal results and bleak outlook; it's trading close to a 52-week low of $77.96. This marks the first time since 2017 that you had the opportunity to procure the retail stock at an even lower price.
Dollar General faces challenges but offers significant potential for long-term growth. With over 20,000 stores, this expansion machine could cut costs and enhance profitability to survive tough times, as long as its earnings don't rebound. The business might present some risks and uncertainty currently, but at such a depressed valuation and with the stock trading at less than 13 times next year's profits (calculated based on analyst estimates), it could be an appealing contrarian investment right now.
Nike
Another viable contrarian pick is Nike. The sports apparel and footwear giant has encountered difficulties moving its high-priced merchandise due to inflation. The company recently changed leadership, with the hope that new CEO Elliott Hill could rejuvenate it and prioritize in-store sales over online business, which should ultimately boost both its revenue and bottom line.
Nike remains popular, although it's grappling with challenges currently. Sales were down 10% in the most recent period (ending on Aug. 31), but it struggles when economic conditions are less than ideal and consumers are facing higher costs.
It's premature to give up on Nike. Investing in the stock right now when it's close to its 52-week low of $70.75 could pay off for investors in the future. It will take time and patience, but this stock could generate substantial returns.
Merck
The list concludes with pharmaceutical giant Merck, which is on the verge of its 52-week low of $98.60, down 6% for the year. While it hasn't experienced a steep sell-off this year, its relatively modest drop has kept this potentially underpriced stock undervalued. At just 10 times its estimated future profits, Merck is a much more affordable option than the average healthcare stock, which trades at a forward price-to-earnings multiple of 21.
Merck's sales surged in its latest earnings report, with the company's top line growing by 7% (excluding foreign exchange) to $16.7 billion for the period ending Sept. 30. Its adjusted earnings per share of $1.57 for the quarter also surpassed analyst expectations of $1.50.
Investors have been hesitant to buy Merck largely due to its reliance on cancer drug Keytruda, which is expected to face patent challenges in the coming years. However, Merck has been investing in research and development and pursuing acquisitions to bolster its growth prospects. In November, the Food and Drug Administration licensed Winrevair, a potential blockbuster treatment for pulmonary arterial hypertension.
As with the other stocks on the list, you'll need to assess some risk and be inclined to accept uncertainty with this investment. However, the payoff could be substantial, considering the discount Merck's stock presents right now.
The financial instability of Dollar General, as indicated by its 43% decline in stock price this year and its struggle with a "financially constrained" customer base, might make some investors wary. However, its discounted price and potential for long-term growth, such as cutting costs and enhancing profitability, could attract investors seeking value in the finance sector.
The sports apparel and footwear giant, Nike, is currently facing inflation-related challenges in moving its high-priced merchandise, resulting in a 10% sales decrease in the most recent period. However, with the appointment of a new CEO and a focus on in-store sales, some investors might see this as an opportunity to invest in the stock at a lower price, with the hope of substantial returns in the future.
