The stock market has been more erratic with investors reacting to heightened trade tensions and new tariffs. On March 5, it was reported by BBC News that America imposed a 25% tariff on Mexican and Canadian imports and a 10% tariff on Chinese imports. China retaliated with tariffs of between 5% and 15% on selected American imports and Canadian Prime Minister Justin Trudeau and Mexican President Claudia Sheinbaum stated that retaliatory measures would be on the agenda. These tariffs have been a cause of concern over heightened business costs, supply disruptions, and a more general slowing of the global economy.
Against this backdrop, the S&P 500 fell sharply with over 80% of its constituents in red, CNBC reported. A handful of investors used the pullback to scoop up battered stocks and most notably those with solid fundamentals that have underperformed in recent months. Richard Fisher, a one-time president at the Dallas Federal Reserve, explained in a CNBC TV appearance that tariffs are a hidden tax that impose cost and have the ability to slow growth as companies adjust to higher cost. With market sentiment being very sensitive to policy and macroeconomic conditions, investors are searching for undervalued positions that can weather short-term fluctuations and generate long-term growth.
In such a scenario, investors are turning towards companies with good valuations, good growth in earnings and revenue growth rates, and sustainable competitive advantage. Value investing, where one tries to acquire stocks at a price that is lesser than their intrinsic value, is a well-tested and trustworthy means to navigate through uncertain markets.
Our Methodology
In order to allow investors to capitalize on current market imbalances, we used stocks screeners to select ten stocks that meet rigorous tests for value. We looked for firms with a forward P/E of less than 20 and a minimum average upside potential of 30% based on analysts’ target prices in an effort to supply a portfolio of solid undervalued candidates. The stocks are ranked in ascending order of analysts’ upside potential. The information was obtained on March 6, 2025, from CNN.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Undervalued Stocks with the Highest Upside Potential
10. The AES Corporation (NYSE:AES)
Forward P/E Ratio: 5.32x
Upside Potential: 33%
Number of Hedge Fund Holders: 53
The AES Corporation (NYSE:AES) is a power and utility company with worldwide experience in energy storage, clean energy, and grid modernization. They have thermal power generation facilities, hydro power generation facilities, wind power generation facilities, and solar power generation facilities that generate power for millions of customers in Europe, Latin America, and in America. AES is moving towards clean energy technologies because of growing demand for clean electricity generation and decarbonization.
Q4 2024 adjusted EPS was $0.54, representing a 58.8% positive surprise over analysts’ forecasted expectations of $0.34. It was 26% lower than Q4 2023’s $0.73 a share due to greater charges on interest and power price movements. AES is still expanding its clean energy portfolio by acquiring solar, wind, and battery storage assets to drive long-term earnings growth.
The AES Corporation (NYSE:AES) has been making long-term contracts with utilities and firms for renewable power, yielding revenue stability and cash flows. The company is also building battery storage products, strengthening its market position in grid reliability and energy transformation markets.
Analysts are predicting a 33% increase from its current level of $11.25 with a mean target price of $15. Investors in April 2025 will be hoping for growth in green energy activities, enhanced cash flows, and growth in margins when the company makes its next earnings announcement.
9. PagSeguro Digital Ltd. (NYSE:PAGS)
Forward P/E Ratio: 5.52x
Upside Potential: 43%
Number of Hedge Fund Holders: 36
PagSeguro Digital Ltd. (NYSE:PAGS) is a leading Brazilian fintech company that provides digital payments, mobile banking, and point-of-sale (POS) solutions to small business and micro-merchant clients.
PagSeguro Digital Ltd.’s (NYSE:PAGS) Q4 2024 revenue came in at $3.2 billion, 25% higher than last year due to high volumes and growth in digital banking business. Q4 2024 EPS of PagSeguro came in at $0.34, surpassing analysts’ forecast of $0.29 by $0.05. Q4 revenue came in at $875.27 million, surpassing analysts’ forecast of $872.66 million. Total payment volume (TPV) surged on the back of growth in Brazil’s shift towards cashless payments.
The company is adding to its PagBank ecosystem a full range of finance services from digital accounts to investments and personal loans. The initiative boosts customer retention and engagement and solidifies the business’s competitive edge over fintech companies and legacy banks.
Analysts are optimistic but cautious with a mean target price of $10.73, up 43% from a level of $7.50. Investors are cautious due to increased competition and regulatory risks in Brazil’s fintech market. Investors will be watching for transaction growth in the next earnings announcement in May 2025 and profitability growth and further digital banking growth.
8. Avantor Inc. (NYSE:AVTR)
Forward P/E Ratio: 16.52x
Upside Potential: 43%
Number of Hedge Fund Holders: 39
Avantor Inc. (NYSE:AVTR) is a leader in life sciences and biopharmaceutical products and solutions and advanced materials. The company distributes critical products to healthcare, research, and high-tech markets. Avantor facilitates drug manufacturing, laboratory research and development, and semiconductor manufacturing and is a mission-critical healthcare supply chain provider.
Q4 2024 net sales were $1.69 billion, a 2% decline year over year and 1% organic growth. GAAP diluted EPS and adjusted EPS were $0.73 and $0.27, respectively, reflecting cost control amid macroeconomic challenges. Avantor Inc. (NYSE:AVTR) generated $173.3 million in operating cash flow and $222.1 million in free cash flow, reflecting good management of cash.
Avantor Inc. (NYSE:AVTR) is increasing its manufacturing capability in biopharmaceuticals with a focus on growth segments such as cell and gene therapy, mRNA technologies, and semiconductor materials. Its acquisitions and digital transformation are designed to propel revenue in the long term.
The analysts are predicting a 43% upside with a target price of $25 based on a current price level of $17.5. Avantor’s April 2025 earnings announcement would most likely paint a better picture as far as revenue stabilization and recovery plans are concerned.
7. Alaska Air Group (NYSE:ALK)
Forward P/E Ratio: 9.92x
Upside Potential: 45%
Number of Hedge Fund Holders: 45
Alaska Air Group (NYSE:ALK) is a large US airline holding company with Alaska Airlines and Horizon Air carrying passengers and cargo both within and to and from United States destinations with recent expansions in overseas markets.
Alaska Air Group Inc. (NYSE:ALK) announced Q4 revenue of $3.53 billion for 2024, a 38% rise over last year’s comparable quarter. Q4 GAAP net income totaled $71 million and brought net income for the year to $395 million. Q4 adjusted net income totaled $125 million and for the year to $625 million. Q4 adjusted EPS of $0.97 exceeded analysts’ predictions of $0.44.
Revenue growth resulted from holiday and business travel demand, improved pricing power, and more solid leisure travel demand. The acquisition of Hawaiian Airlines in September of 2024 supported that revenue growth.
Analysts are bullish on Alaska Air Group’s (NYSE:ALK) future as 13 analysts have a consensus target price of $88.00, representing a potential upside of approximately 45% from a last price of $60.64.
6. Acadia Healthcare Company Inc. (NASDAQ:ACHC)
Forward P/E Ratio: 11.55x
Upside Potential: 47%
Number of Hedge Fund Holders: 46
Acadia Healthcare (NASDAQ:ACHC) is a large behavioral healthcare provider with a psychiatric hospital chain, addiction treatment facilities, and outpatient facilities in America. It has been a beneficiary of a surging demand for mental healthcare in recent years, most prominently in pandemic years.
Acadia Healthcare Company Inc. (NASDAQ:ACHC) in Q4 2024 reported EPS of $0.35 and 4.2% revenue growth quarter over quarter. It is in the process of opening new centers for addiction and mental health treatment and expanding its capacity. Its business model is to open teen, veteran, and dual-diagnosis disorder specific treatment centers. It is expanding further with telehealth services to treat more underprivileged sections of society.
With a target price of $44, a 47% gain is achievable from $30. April 2025’s next earnings release will focus on facility expansions and enhancing operational efficiency.
5. Alcoa Corporation (NYSE:AA)
Forward P/E Ratio: 8.49x
Upside Potential: 54%
Number of Hedge Fund Holders: 47
Alcoa Corporation (NYSE:AA) is a worldwide aluminum producer with mining, refining, and smelting operations. Industrial demand worldwide has made Alcoa a global leader in the automobile, aerospace, and packaging industries.
Alcoa Corp. (NYSE:AA) reported Q4 2024 EPS of $0.76, 9.8% down from a year earlier due to declining aluminum prices. The company is, however, increasing low-carbon aluminum production in parallel with heightened demand for green metals for EV and renewable energy applications.
The company is investing in bauxite mining and refining of alumina and is driving cost and operational efficiency through restructuring. Future growth is supported by investment in industrial and infrastructure activity in emerging economies.
The analysts project a 54% rise from current price levels. Market trends, aluminum pricing, and cost-cutting initiatives will be reported in April 2025 with the next earnings announcement.
4. Abercrombie & Fitch Company (NYSE:ANF)
Forward P/E Ratio: 7.71x
Upside Potential: 57%
Number of Hedge Fund Holders: 51
Abercrombie & Fitch Company (NYSE:ANF) is an apparel retail chain with Hollister and Abercrombie brands. Abercrombie has been successful in establishing itself as a premium lifestyle brand with a direct-to-consumer business model and a global presence.
Abercrombie & Fitch Company (NYSE:ANF) announced Q4 2024 diluted EPS of $3.29, a 38% improvement over Q4 last year’s $2.38. Operating margin was driven by full-price selling, good product mix, and cost control. Strong holiday season demand and efficient inventory management underpinned better-than-anticipated profitability.
The firm is making investments in shop remodellings and multichannel retailing in a bid to enhance positioning and customer interaction. The analysts expect 57% upside from the current price. The earnings are to be announced in May 2025.
3. American Airlines Group Inc. (NASDAQ:AAL)
Forward P/E Ratio: 5.53x
Upside Potential: 65%
Number of Hedge Fund Holders: 59
American Airlines (NASDAQ:AAL) is a large airline with in-country and out-of-country passenger services. American Airlines is seeing a strong recovery in air travel demand with growing passenger traffic and premium bookings fueling revenue.
American Airlines Group Inc. (NASDAQ:AAL) reported a Q4 2024 profit of $0.84 a share as revenue fell 17.3% year over year due to fuel cost fluctuations and macroeconomic headwinds. Trends in unit revenue were better and the company has been expanding transatlantic and Latin American routes in an attempt to capitalize on growth in overseas travel.
The carrier is investing in aircraft upgrades, premium product and service developments and digital innovations like AI-enabled route planning and personalized reservation flows. American Airlines is also simplifying debt and strengthening its balance sheet to improve long-term financial resilience.
Analysts have a target price of $21.50 and project a gain of 65% based on a current price of $13.03. April 2025’s earnings release will be punctuated by highlights of growth in capacity, profitability improvement and cost cutting.
2. Alight Inc. (NYSE:ALIT)
Forward P/E Ratio: 10.59x
Upside Potential: 73%
Number of Hedge Fund Holders: 42
Alight Inc. (NYSE:ALIT) is a premier provider of human capital and cloud-based benefits to large organizations and government agencies. An expert in payroll, HR analytics, and workforce management, Alight empowers organizations to enhance performance with digital platforms powered by artificial intelligence.
Alight Inc. (NYSE:ALIT) had Q4 2024 revenue of $680 million, down only 0.3% from Q4 2023. Alight’s BPaaS segment did increase, however, with revenue up 9.8% to $146 million, or 21.5% of revenue. Gross profit came in at $271 million with a gross margin of 39.9%, compared with $270 million and a 39.6% margin in Q4 2023.
The company is introducing machine learning-based HR and payroll services to augment its workforce management. Alight has signed multiyear agreements with Fortune 500 clients with revenue guarantees. With a price target of $11, there is 73% upside at a current price of $6.36. The April 2025 next earnings release will have digital transformation and revenue growth opportunities as a focus.
1. Power Solutions International, Inc. (NASDAQ:PSIX)
Forward P/E Ratio: 10.60x
Upside Potential: 100%
Number of Hedge Fund Holders: 7
Power Solutions International, Inc. (NASDAQ:PSIX) is a NASDAQ-listed corporation that specializes in designing, engineering, and producing emission-certified power systems and engines. They produce products that are engineered for a variety of industries such as industrial power generation and transportation and are designed for use in alternative-fueled power systems that are powered by natural gas, propane, and gasoline.
Power Solutions International, Inc. (NASDAQ:PSIX) reported Q3 2024 net income of $17.3 million, a 122% net income improvement compared with last year’s comparable quarter. Gross margin of 28.9% was a 4.8 point improvement compared with last year. Diluted EPS of $0.75 was a $0.41 improvement compared with last year.
The company has been actively growing its capital base and expanding its market presence. Power Solutions International, Inc. (NASDAQ:PSIX) made a new uncommitted senior secured revolving credit agreement with lenders and Standard Chartered Bank in September 2024 in an attempt to enhance its financing flexibility.
Analysts are bullish on Power Solutions International, Inc.’s (NASDAQ:PSIX) outlook. The stock has a consensus target price of $55, a 100% gain from where it currently stands at $27.45.
While we acknowledge the potential of PSIX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PSIX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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