The U.S. stock market as a whole may be thriving right now, but some stocks just aren’t winning investors over. Usually, when a stock gets revalued lower, it’s due to concerns about a company’s long-term future, poor financial results, or simply as a result of industry-related issues.
United Parcel Service (NYSE: UPS), Novo Nordisk (NYSE: NVO), and Adobe (NASDAQ: ADBE) are all down more than 20% this year for reasons like those. However, they now look too cheap to pass up.
Image source: Getty Images.
United Parcel Service, better known as just UPS, is the type of business that will grow along with the broader economy. It’s also the type of stock that can make for a safe long-term holding. In the short term, tariffs and a slowdown in global trade are impacting its business, but those are issues that shouldn’t persist in the long run.
The stock is down 24% this year (as of Dec. 8), and trading at a price-to-earnings (P/E) multiple of less than 15, which is far below the S&P 500‘s average of 25. There hasn’t been much in the way of growth lately at UPS — its top line came in at around $21 billion in each of its past three quarters. But I admire the company’s management for its recent decision to reduce the volume of packages it’s handling for Amazon for the sake of improving profitability. Far too often, executives prioritize the top line over the bottom line. It’s great to see UPS focusing on what matters: profit margins.
It may be a tough road ahead for UPS until economic conditions improve, but that’s also precisely why now may be an opportune time to invest in it while its valuation is low. And at current share prices, investors who buy now can also secure a great dividend yield of nearly 7%.
Drugmaker Novo Nordisk has crashed by 45% so far this year. It’s been a tumultuous year for the company, as its former CEO surprised it by resigning, and the company slashed its sales guidance. Investors have flocked to rival Eli Lilly instead. (It’s up around 30% this year.)
Novo’s stock is trading at a P/E ratio of just 13, which appears ludicrous given the company’s phenomenal growth opportunities. During the first nine months of the year, its sales rose by 15% (when excluding the impact of foreign currency exchange rate shifts). But the company would be doing better if not for compounding pharmacies that are selling copies of its popular drugs, Wegovy and Ozempic. It’s controversial because compounding a patent-protected drug is only legal when there’s a shortage of the drug in question, and that is no longer the case for semaglutide (the underlying pharmaceutical for both of those brands).
The company is suing many compounding pharmacies, and if successful, a crackdown on them should improve its growth prospects in the near future. In the long run, however, Novo Nordisk remains a top player in the GLP-1 drug market, and those types of drugs have been linked to many health benefits, including helping people with sleep apnea and potentially curbing alcohol addiction.
Things may look rough for Novo Nordisk today, but I certainly wouldn’t count the stock out. The company has plenty of growth opportunities ahead that make it an excellent buy right now.
Adobe is down 24% this year and trades at a P/E multiple of just 21. In years past, the tech stock has traded at more than twice that multiple. Investors may be growing concerned about the company’s prospects for long-term growth due to rising competition from artificial intelligence (AI) systems. It’s easier than ever for even novice users to edit photos right on their phones or generate images, and thus, investors may expect demand for Adobe’s products to sink.
However, Adobe’s image-editing software is top of the line and remains in high demand. Its flagship product, Photoshop, has a steep learning curve, and I’d argue it isn’t going to appeal to the type of user who just wants an easy and quick way to edit their vacation photos. Basic photo editing may be easier with the assistance of an AI tool, but to make precise, detailed, and complex edits, Photoshop is still more practical.
Adobe’s resilient results seem to corroborate that. The company posted record revenue in its most recent quarter, which ended on Aug. 29. Sales were up 11% to $6 billion. And if Adobe does face rising competition, one lever it can pull to boost its market share is price. It may have to sacrifice some margins in exchange for growth, but given its excellent profit margin of 30%, it has more than a little wiggle room.
Before you buy stock in United Parcel Service, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and United Parcel Service wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $521,550!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,133,904!*
Now, it’s worth noting Stock Advisor’s total average return is 981% — a market-crushing outperformance compared to 194% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
David Jagielski, CPA has positions in Novo Nordisk. The Motley Fool has positions in and recommends Adobe, Amazon, and United Parcel Service. The Motley Fool recommends Novo Nordisk and recommends the following options: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.
