Buying quality growth stocks doesn't have to involve paying an enormous premium. There are some solid, underrated companies worth buying right now that don't trade at egregious valuations. While these aren't exciting artificial intelligence stocks that are doubling or tripling their sales, they still possess a lot of attractive growth potential in the long run.
If you have $5,000 that you can afford to invest in the market today, three stocks you should consider loading up on right now are UnitedHealth Group (NYSE: UNH), American Express (NYSE: AXP), and PayPal Holdings (NASDAQ: PYPL). Here's why these companies could be bargain buys for the long haul.
UnitedHealth Group
UnitedHealth Group is a behemoth in the healthcare industry. It generates massive profits, pays a dividend, and is always getting bigger organically and via acquisitions. But it's a health insurance company first and foremost, so it's not going to generate the same type of excitement as a top tech stock might. But that means you have an opportunity to snag a cheap stock right now.
The company has been facing some headwinds lately due to rising costs and a data breach involving Change Healthcare, but those aren't problems that should weigh down the business in the long run. And based on analyst expectations for its future earnings, UnitedHealth stock trades at a forward price-to-earnings (P/E) multiple of just over 20. That's less than the S&P 500 average of nearly 23.
And with UnitedHealth being a leader in its industry, it's a safer buy than most healthcare stocks. From 2020 through to 2023, the company has been a growth beast, with its top line soaring from $257.1 billion to $371.6 billion. And its profits improved from $15.4 billion to $22.4 billion.
UnitedHealth is facing a tough 2024, but in the long run, this could be a terrific stock to buy and hold. It also pays a dividend that currently yields 1.5%, sweetening the deal even further for investors.
American Express
The only stock on this list that has been outperforming the S&P 500 this year is American Express. The credit card giant has gained around 31%, which is close to double the index's performance thus far in 2024.
But even despite the impressive returns this year, American Express still only trades at a forward P/E of 19. The company's operations have been resilient over the years because targeting an affluent customer base has allowed American Express to consistently post strong numbers.
In its most recent quarter (the period ended June 30), American Express reported revenue of more than $16.3 billion, which grew at a rate of 9% year over year when excluding the impact of foreign exchange. And on the bottom line, its adjusted earnings per share increased by 21%. The company says cardholder spending has risen by close to 40% since the end of 2021 as American Express has focused on scaling its operations and expanding its user base.
American Express looks like an even better deal once you compare it to rivals Mastercard and Visa, which trade at forward P/E multiples of 31 and 24, respectively.
PayPal Holdings
The most discounted stock on this list is PayPal. The fintech is trading at a forward P/E multiple of just 14. Despite its low valuation, investors have been hesitant to pull the trigger on the shares, which are down 1% since the start of the year.
It's easy to see why investors might be bearish on the stock. There are, after all, many competing payment options to choose from and ways to transfer money beyond PayPal. But I'm not all that convinced that the business is in such terrible shape. This is still a top brand in the payments industry and there is no shortage of people who continue to trust and use PayPal's products and services.
During the first three months of the year, the company's net revenue rose by 9% to $7.7 billion, and payment volumes increased 14%. The global economy isn't in terribly strong shape these days due to inflation, but as those conditions improve, PayPal's growth rate could rise even higher in the future.
The stock dipped to less than $50 per share last year, but beyond that, the last time PayPal was around these levels was back in 2017. The business isn't in as dire of a situation as the stock price would suggest, and buying it today could set investors up for some great returns in the long run.
Should you invest $1,000 in UnitedHealth Group right now?
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American Express is an advertising partner of The Ascent, a Motley Fool company. David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Mastercard, PayPal, and Visa. The Motley Fool recommends UnitedHealth Group and recommends the following options: long January 2025 $370 calls on Mastercard, short January 2025 $380 calls on Mastercard, and short September 2024 $62.50 calls on PayPal. The Motley Fool has a disclosure policy.
