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The stock market closed at a record high today as the DJIA rose over 42 points and the S&P 500 gained 0.4%. The optimism in the equity market was ignited by the better-than-expected GDP growth in the third quarter, after Q3 domestic GDP was revised higher to 2.1% from a previous reading of 1.9%
This helped Wall Street feel better about the general health of the US economy, as U.S.-China trade war optimism continues. The strong domestic economy has fueled the stock market’s historic run that, in turn, has inflated the valuation of many big-name stocks.
As equities continue to climb higher, let’s take a look at a few stocks with more buyer-friendly valuations.
Citigroup C is coming off a third quarter where it saw its revenue grow around 1% and its earnings climb 20%. The top and bottom-line growth was driven by a strong global consumer banking segment that popped 2% higher to $8.66 billion. Citigroup also saw its business improve in the EMEA region, with revenue up 6%.
Citigroup’s stock currently trades around 9X its forward earnings, which is below the industry average of 12X. The firm also pays out a quarterly dividend with a 2.7% yield that can anchor returns in times of broader market turbulence.
The bank stock sits at a Zacks Rank #3 (Hold) and has made a solid run in 2019 as its shares have climbed over 45% to outpace industry peers such as JP Morgan JPM, Bank of America BAC, and PNC PNC.
Sonic Automotive SAH is a stock that has been on an absolute tear in 2019 as its shares have soared over 143%. The automotive retailer is also coming off a third quarter where its total sales spiked 9.4% and its earnings grew 83%. Its EchoPark business continued its impressive success with a 67.9% hike in sales in the third quarter. The EchoPark business is on track, according to management, to bring in over $1 billion in fiscal 2019, which can bolster SAH’s bottom-line.
EchoPark’s provides what the company describes as bringing “Costco-like COST deals” to consumers through pre-owned vehicle lots. Our Q4 consensus estimates forecast earnings to rise 15.8% to $0.88 per share and for sales to rally 7.4% to $2.77 billion.
SAH stock trades for about 13X its forward earnings compared to the industry average of 12X forward earnings, which is still respectable considering the massive run the stock has been on in 2019. The company also pays out a dividend with a 1.21% yield and has an average EPS surprise of 31.6% over the last for quarters. Plus, Sonic Automotive has had its earnings estimates revised higher recently to help earn the stock a Zacks Rank #1 (Strong Buy).