4 US Value Stocks with Strong Profit Growth
The start of the year has reminded investors that a stock's price and a company's true value don't always move in tandem. In the current market phase, it's wise to look beyond the daily noise and focus on the numbers that truly matter: earnings growth and reasonable valuation. The following overview highlights four U.S. companies that are trading at attractive P/E ratios and have managed to significantly grow their operating profits, offering potential for the patient investor.
Diamondback Energy stands out with an exceptionally low P/E ratio of 9.6, while having grown its operating profit by a staggering 74.1% year-over-year. This combination of a low valuation and rapid growth is rare in the energy sector, suggesting a significant discount relative to the company's earning power.
The growth is driven by a sharp increase in production volumes thanks to successful acquisitions, which have offset lower sales prices. However, investors must consider the risks: the recent drop in oil prices and trimmed analyst forecasts could pressure the stock in the short term, despite its long-term potential in the Permian Basin.
Utilities giant Exelon is trading at a reasonable P/E of 16.5 while demonstrating an impressive 25.4% growth in operating profit. Such a jump in profitability within a stable sector makes the stock attractive to value investors, especially considering the sector's overall reliability.
The key to the company's success lies in its efficiency—revenues are growing faster than costs. Although the stock has undergone a minor correction, the technical picture suggests it is stabilizing. This offers investors an opportunity to enter a company with strong cash flow at a time when the market has temporarily overlooked it.
Operating in the technology sector, Cognizant has maintained a P/E ratio of 16.5 while growing its operating profit by 17.3%. This indicates the company can generate higher profits even with more modest revenue growth, a sign of strong management.
The company's restructuring has paid off, and the focus has shifted from cost-cutting to securing new large contracts, particularly in the healthcare sector. Recent news of multi-billion dollar deals confirms the business model is working, but investors must monitor whether these contracts can be executed profitably and if the growth trend is sustainable.
Biotechnology company Biogen is trading at a P/E of 15.3, having increased its operating profit by 23.6%. Despite these strong numbers, the stock price has recently fallen, which could create a favorable entry point for value-seeking investors who believe in the company's product portfolio.
Growth is primarily driven by the success of its multiple sclerosis drug, VUMERITY, in the U.S. market. However, the market remains cautious about the company's future forecasts. For investors, the key question is whether new drugs can offset the slowing sales of older products and restore market confidence in the long term.
Conclusion
In summary, what unites these selected companies is their ability to grow profits in a challenging environment, whether through increasing production volumes (Diamondback), cost efficiency (Exelon, Cognizant), or a successful product portfolio (Biogen). While low valuation ratios are appealing, it's important to remember that a cheap price always comes with risks—be it oil price volatility or uncertainty in the pharmaceutical industry. A prudent investor will carefully weigh these risks before making a decision.
RYTM content is for informational purposes only, not financial advice or recommendations. You are solely responsible for your investment decisions. Always consult a professional.