The 3 Most Undervalued S&P 500 Stocks to Buy in April 2024

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Looking ahead, the future of the U.S. economy appears promising despite ongoing challenges. President Biden’s efforts to steer the economy through inflation concerns are showing strong results. Recent data indicates a healthy economic position, with significant GDP growth outpacing other developed nations. Despite fluctuations in inflation and interest rates, the U.S. labor market remains resilient, adding jobs at a rapid pace. The country’s economic resilience, bolstered by substantial fiscal stimulus and unique financial structures like fixed-rate mortgages, continues to drive confidence in its stability and growth prospects moving forward. This should all translate into strong market gains, particularly for the most undervalued S&P 500 stocks to buy in April. 

These stocks are all in extremely profitable sectors. Both AMGN and MRK are in the global biotechnology market, which is valued at $1.55 trillion in 2023, and is forecasted to grow at a CAGR of 13.96% until 2030. If you buy these three most undervalued S&P 500 stocks to buy in April, you will profit greatly.

Home Depot (HD)

Home Depot (HD) sign backdropped by blue sky

Source: Rob Wilson / Shutterstock.com

Home Depot (NYSE:HD) is a home improvement retailer that sells tools and appliances. HD is currently trading at $357.87 and has a 12-month median price target of $390.00. This represents a 9.04% increase. 

In the past year, HD has experienced successful growth that is reflected in both its valuation, which is up 22.02% YOY, and its financials. The company boasts a levered FCF margin of 9.89%, above the sector median of 5.55%, and reflects management’s operational efficiency. Home Depot also recently announced a 7.7% increase in its dividend to $2.25 per share. Furthermore, the company reported positive fiscal 2024 guidance with total sales forecasted to grow by 1.0% and 12 new stores expected to be opened. 

Home Depot also recently announced expansion plans, which include large steps toward increasing its market share in Mexico. In 2024, the company plans to invest $172.16 million in Mexico’s market and will widen its product offerings to reach 150 stores in Mexico within the next few years. 

This expansion push is especially important as the global home improvement market is expected to reach $490.13 billion by 2030, exhibiting a CAGR of 4.65%. Fueled by surging home demand and increasing real estate prices, this trend presents Home Depot with substantial growth opportunities. Lastly, with a forward P/E ratio of 23.68 and still trading below its record high, HD is an undervalued S&P 500 stock to strongly consider. 

Merck & Co (MRK)

Merck (MRK) logo outside of corporate building

Source: Atmosphere1 / Shutterstock.com

Merck & Co (NYSE:MRK) is a leading pharmaceutical company, developing products in the area of oncology, cardiovascular, diabetes and more. Its stock is currently up 13.66% over the past year, and analysts indicate that it could still rise. 29 analysts have a median price target of $137.47, representing a 7.68% increase from current levels.

Additionally, MRK is looking undervalued at its current price. It has a GAAP forward P/E of 16.57, which is much lower than the sector median of 27.11. Also, with dozens of promising programs in Merck’s pipeline, it has numerous opportunities to yield new approvals. Merck’s business looks secure, as does its dividend which currently yields 2.31%. While its payout ratio of 81.43% is a bit high, Merck has consistently grown dividends for the past 24 years, and with $6.841 billion in cash, its dividend payout appears safe.

Moreover, Merck’s recent acquisition of Harpoon Therapeutics can be a strong catalyst for the stock. Harpoon’s lead product, MK-6070, is a promising cancer treatment that is being tested in clinical trials. MK-6070, along with Harpoon’s other products, will strengthen and broaden Merck’s existing pipeline.

Amgen (AMGN)

Source: Shutterstock

Amgen (NASDAQ:AMGN) develops and manufactures human therapeutics worldwide. After falling 9.23% YTD, its stock trades for $269.95. However, Amgen’s poor performance could be a buying opportunity, as some analysts believe the company is undervalued. 31 analysts have a median price target of $320.00, which represents an increase of 19.36%, thereby making Amgen an intriguing opportunity.

In Q4 2023, Amgen reported impressive figures, including total revenues of $8.2 billion, marking a 20% increase YOY. Additionally, the company saw non-GAAP EPS rise to $4.71, reflecting growth of 15% YOY. Despite its strong performance, Amgen remains attractively priced, boasting a Non-GAAP forward P/E of 13.99, which is lower than the sector median of 19.58. Furthermore, Amgen offers a solid dividend yield of 3.15%. In the past 10 years, Amgen has increased its dividend payout by more than 400%, and with a dividend payout ratio of 69.18%, its dividend appears sustainable.

Moreover, Amgen recently completed its acquisition of Horizon Therapeutics for $27.8 billion. This move is anticipated to strengthen Amgen’s product portfolio, especially in the realm of rare inflammatory diseases. The deal is also expected to accelerate Amgen’s revenue growth and bolster its cash flow, positioning the company for long-term success.

On the date of publication, Michael Que did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

The researchers contributing to this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

Michael Que is a financial writer with extensive experience in the technology industry, with his work featured on Seeking Alpha, Benzinga and MSN Money. He is the owner of Que Capital, a research firm that combines fundamental analysis with ESG factors to pick the best sustainable long-term investments.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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