Undervalued stocks are those trading below their intrinsic value. That is when you should buy them. It’s how you implement the buy low, sell high investment strategy.

Yet investors have trouble picking up shares of beaten-down stocks. If the market is running away from them it is difficult to run towards them. They think, maybe the crowd knows something I don’t.

Perhaps, but the trick is choosing good companies that are temporarily out of favor. As Warren Buffett said, “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.”

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With the stock market regularly setting new all-time highs, you might think it’s hard to find a bargain. Yet there are plenty of undervalued S&P 500 stocks that you can buy at a discount. For every Nvidia (NASDAQ:NVDA) growing by leaps and bounds there are excellent businesses available to pick up cheap. The three stocks below are sitting 20% or more below their 52-week high. Because they off discounted valuations but are still expected to grow earnings, this is a great time to pick up shares.

Dollar Tree (DLTR)

Source: shutterstock.com/Jonathan Weiss

Deep discount dollar store chain Dollar Tree (NASDAQ:DLTR) should be thriving. The high-inflation economy that isn’t growing jobs and sports meager wage increases ought to make its stores prime destinations for consumers, yet the retailer struggles.

Shares are down 20% in 2024 and slumped 26% from their 52-week high. It is caught between a rock and a hard place. If it remained a pure-play dollar store, it wouldn’t be able to make ends meet itself. It operates on such thin margins that offering goods at $1 or $1.25 would leave it no room for profits.

Boosting its price point to the $3 to $5 range has helped broaden the quality and selection of goods it offers but increases the discount retail competition it faces. It also just took it on the chin after announcing it was looking to sell its Family Dollar chain. It’s possible it could spin the business off again too. It was a bad acquisition almost a decade ago and it hasn’t improved since.

First-quarter revenue increased 4% to $7.6 billion on a 1% increase in comparable sales with Dollar Tree comps up 1.7%. It reiterated its full-year outlook of $31 billion to $32 billion represents mid-single-digit revenue growth. Adjusted earnings of $6.50 to $7.00 per share are a 15% increase year-over-year at the midpoint.

With Dollar Tree stock trading at 14 times those expected earnings and at a fraction of sales, the deep discount retailer is one of the undervalued S&P 500 stocks to buy.

SLB (SLB)

Source: Valentin Martynov / Shutterstock.com

Formerly known as Schlumberger, SLB (NYSE:SLB) is the world’s largest oilfield services provider with over $33 billion in annual revenue. Shares are down 17% year-to-date but off 30% from recent highs. Concern about falling global demand for oil weighs on the stock, especially the recent announcement by the Organization of Petroleum Exporting Countries (OPEC) and its allies to gradually lift production cuts. The concerns are overblown.

The long-term forecast for oil remains strong, despite numerous countries wanting to go green and switch to wind and solar. There is simply not enough capacity available to meet demand for that to happen any time soon.

The U.S. Energy Information Administration expects demand to keep growing this year along with greater production. That will benefit SLB as it invests in new technology and digital solutions. Its investments in lower-carbon technologies and carbon capture and sequestration initiatives helped first-quarter revenue grow 13% to $8.7 billion.

Earnings are expected to grow 21% for the next five years but SLB stock trades at a fraction to that rate. It also goes for a discounted 13 times the free cash flow it produces. At these levels, and with its forward-looking investments creating new value-added revenue streams SLB is an undervalued S&P 500 stock to buy.

Expedia (EXPE)

Source: NYC Russ / Shutterstock.com

Online travel agent Expedia (NASDAQ:EXPE) offers investors a good opportunity to get in on the beaten-down business just as it prepares to take flight. EXPE stock is down 23% this year and trades 28% lower than it did a year ago. But a turnaround is in the works.

Expedia transitioned to a unified platform over the past few years, allowing its different brands to share and supply between them. It is also growing its presence internationally, and though Booking Holdings (NASDAQ:BKNG) represents a formidable competitor to go up against, it should be able to single network advantage over time.

Like many companies, Expedia seeks to exploit the vast spending data it collects to build out a new media network. With ad spending crossing $50 billion last year it should provide the online travel agency with supplemental revenue streams. That will add to its growth in emerging markets like China where it has a partnership with Trip.com (NASDAQ:TCOM) as well as in the vacation rental market. Its Vrbo unit is the third-largest player behind Airbnb (NASDAQ:ABNB) and Booking.

Despite Expedia stock jumping 26% of its lows, it still trades at 8 times next year’s earnings. EXPE is also trading at less than twice its sales. With EXPE stock also going for a rock-bottom 9 times FCF, this is a deeply discounted stock ready to run.

On the date of publication, Rich Duprey 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.

Rich Duprey has written about stocks and investing for the past 20 years. His articles have appeared on Nasdaq.com, The Motley Fool, and Yahoo! Finance, and he has been referenced by U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, USA Today, Milwaukee Journal Sentinel, Cheddar News, The Boston Globe, L’Express, and numerous other news outlets.

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