Chicago, IL – March 31, 2025 – Stocks in this week’s article are JD.com JD, Universal Health Services UHS, Fresenius Medical Care FMS and Qifu Technology, Inc. QFIN.
4 Best Value Stocks with Low PEG to Boost Your Portfolio Returns
At a time when volatility strikes every second day, investors often rely on value investing rather than other options like growth or momentum. As soon as other investors start selling their stocks at a cheaper rate in times of market uncertainty, value investors take this as an opportunity to pick good stocks at a discounted price.
Several stocks that have surged significantly in the recent past have shown the overwhelming success of this pure-play investment strategy. Here, we discuss four such stocks — JD.com, Universal Health Services, Fresenius Medical Care and Qifu Technology, Inc..
However, this apparently simple value investment technique has some drawbacks and not understanding the strategy properly may often lead to "value traps." In such a situation, these value picks start to underperform over the long run as the temporary problems, which once drove the share price down, turn out to be persistent.
There are many value investment yardsticks, such as dividend yield, P/E or P/B, which are simple and can single out whether a stock is trading at a discount.
However, for investors looking to escape such value traps, it is also vital to determine where the stocks will be headed in the next 12 to 24 months. Warren Buffett advises these investors to focus on the earnings growth potential of a stock. This is where lies the importance of a not-so-popular value investing metric, the PEG ratio.
PEG Ratio at a Glance
The PEG ratio is defined as (Price/ Earnings)/Earnings Growth Rate
A low PEG ratio is always better for value investors.
While P/E alone fails to identify a true value stock, PEG helps find the intrinsic value of a stock.
There are some drawbacks to using the PEG ratio. It doesn't consider the very common situation of changing growth rates, such as the forecast of the first three years at a very high growth rate, followed by a sustainable but lower growth rate over the long term.
Hence, PEG-based investing can turn out to be even more rewarding if some other relevant parameters are also taken into consideration.
Here are four out of the 10 stocks that qualified the screening:
JD: The company is a supply chain-focused technology and service provider in China. It offers a diverse range of products, including computers, communication devices, and consumer electronics, along with home appliances. Its general merchandise portfolio spans food, beverages, fresh produce, baby and maternity products, furniture, household essentials, cosmetics, personal care items, pharmaceuticals, healthcare products, industrial supplies, books, automotive accessories, apparel, footwear, bags, and jewelry.
JD.com currently has a Zacks Rank #1 and a Value Score of A. JD also has an impressive five-year historical growth rate of 44.3%.
Universal Health: King of Prussia, PA-based Universal Health owns and operates (through its subsidiaries) acute care hospitals, behavioral health centers, surgical hospitals, ambulatory surgery centers and radiation oncology centers. The company's range of services includes general and specialty surgery, internal medicine, obstetrics, emergency room care, radiology, oncology, and diagnostic care, among others.
Apart from a discounted PEG and P/E, UHS currently has a Zacks Rank #2 and a Value Score of A. Universal Health has a long-term expected growth rate of 16.9%.
Fresenius Medical: Based in Bad Homburg, Germany, Fresenius Medical Care is one of the largest integrated providers of products and services for individuals undergoing dialysis following chronic kidney failure. Fresenius Medical manufactures a variety of durable medical devices used for the treatment of end-stage renal disease.
Fresenius Medical has a Zacks Rank #1 and a Value Score of A. FMS also has an impressive five-year expected growth rate of 11.9%.
Qifu Technology: This is a leading AI-empowered Credit-Tech platform in China. By leveraging its sophisticated machine learning models and data analytics capabilities, Qifu Technology provides a comprehensive suite of technology services to assist financial institutions and consumers and SMEs in the loan lifecycle, ranging from borrower acquisition, preliminary credit assessment, fund matching and post-facilitation services.
Qifu Technology has an impressive long-term historical earnings growth rate of 39.1%. QFIN currently has a Value Score of A and a Zacks Rank of 1. You can see the complete list of today's Zacks #1 Rank stocks here.
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