This year has dramatically changed the consumer shopping landscape. The pandemic has altered the way we buy both essential and non-essential goods and accelerated e-commerce growth globally.
So, it stands to reason that certain consumer-related stocks should continue to benefit from the unusual shopping environment. And while many certainly have, some consumer stocks remain ripe for the picking due to their attractive valuations.
Here we look at some downright cheap large-cap consumer plays that investors should consider loading into their shopping carts.
Should Investors Bid on eBay Stock?
Almost three years ago when eBay (NASDAQ:EBAY) stock was trading around $45 per share it had a forward P/E ratio around 19x. Fast forward to today and eBay is trading around $48 with forward and trailing P/E ratios of 17x and 7x, respectively. This makes the online retail pioneer one of the least expensive plays on the global consumer—and at a time when e-commerce is exploding.
Granted, eBay doesn't command the same premium valuation it did in the late 1990's givenAmazon's dominance and the rising threat of competition from other global e-commerce players. But it still has room for significant multiple expansion.
While it's no Amazon, eBay is still a force to be reckoned with in an increasingly online-centric shopping world. The company posted 22% earnings growth last year and is on pace to record similar growth in 2020. Much of the success can be attributed to eBay's enhanced seller tools which has attracted a broader scope of retailers both in terms of size and product category.
In the near-term eBay should continue to be a major beneficiary of the pandemic economy. And a changing consumer preference to shop online will likely carry over into the post-pandemic world. This is especially the case in mobile e-commerce to which eBay is devoting much attention to win over smartphone-centric Millennials and other young consumers.
Although eBay may not have the growth track record of an Amazon or Alibaba, it does have some growth opportunities on the horizon. It has a huge customer base from which to build from and expand opportunities across several international markets.
Is Campbell's More Than Just a Soup Company?
Shares of Campbell Soup (NYSE:CPB) have historically been one of the least expensive consumer stocks, but right now they are really cheap. The iconic soup maker trades around 9x trailing earnings which puts it in the bargain bin among S&P 500 constituents.
As we brace for the long winter months with the backdrop of rising coronavirus cases, Campbell's soups and other cold weather items are likely to be high on consumer stockpiling list.
The company rode the bulk shopping trend to record double digit sales and profit growth last quarter. However, the market focused on the company's struggles with cost inflation and higher marketing expenses in an overcooked selloff.
The early September dip below $45 created a great entry opportunity, but its not to late to buy Campbell's. The stock has climbed higher by about 10% since but looks to be heating up ahead of its December 2nd earnings report.
Campbell's has become a much more diversified food company in recent years. While some investors are quick to see it as a simple soup business, last quarter it generated 51% of revenue from its snacks segment. This includes popular cracker and cookie brands like Goldfish, Pepperidge Farms, and Synder's-Lance.
The fast-growing snacks business serves as a nice side dish to the steadier legacy soup and broth business. This may remind investors of a company like Pepsi which is experiencing similarly strong growth in its non-legacy snacks business. Toss in Campbell's other lesser known brands like Prego pasta sauce and V8 juices, and the company starts to look like a very appetizing consumer staple play.
In a couple of weeks the Street will be looking for first-quarter fiscal 2021 EPS growth around 17%. But cost savings initiatives and intensifying consumer stockpiling worldwide in October may produce a steamy earnings surprise.
Is Kroger Stock a Buy Ahead of Earnings?
Staying in the supermarket aisles, Kroger (NYSE:KR) is another inexpensive consumer stock with some modest upside potential. At 10x both trailing and forward earnings the leading grocer is a defensive play that investors should definitely 'checkout'.
Kroger is not a stock that will double near-term, but it can gradually climb to $40 in the months ahead. Given its recent growth figures and worsening pandemic conditions that point to another wave of shopping sprees, Kroger deserves to trade at a higher valuation.
Halfway through its fiscal year, the company is on pace to nearly double its sales growth to the 8% to 9% range—and earnings growth is forecast to be a staggering 49%. Not bad for competing in a notoriously low margin industry.
While pandemic-driven demand and successful online shopping alternatives have been a driving force, so too has cost-cutting. The operator of more than 2,700 supermarkets under a variety of names has an improving margin trend backed by sales leverage and sourcing efficiencies tied to the "Restock Kroger" campaign. This includes investments in store remodels, technology, and better space utilization. Complementary, higher-margin offerings such as pharmacies and fuel are also contributing to stronger profitability.
Kroger is scheduled to report performance for the quarter ended October 31st on December 3rd. The consensus expectation is for a 40% surge in earnings. But after the significant earnings beat we saw last period, it wouldn't be shocking if the company posted another positive surprise. If it does, expect Kroger's P/E multiple to expand and the recent slide in the share price to reverse.
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist
15 Healthcare Stocks that Analysts Love
There are more than 200 healthcare companies traded on public markets. Given the sheer number of pharmaceutical companies, medical research firms, hospital systems, and other healthcare stocks, it can be hard to identify which healthcare companies will outperform the market.
Fortunately, Wall Street's brightest minds have already done this for us. Every year, analysts issue approximately 3,000 distinct recommendations for healthcare companies. Analysts don't always get their "buy" ratings right, but it's worth taking a hard look when several analysts from different brokerages and research firms are giving "strong-buy" and "buy" ratings to the same healthcare stock.
This slide show lists the 15 healthcare companies with the highest average analyst recommendations from Wall Street's equities research analysts over the last 12 months.
View the "15 Healthcare Stocks that Analysts Love".