In this article, we discuss 5 most profitable cheap stocks to buy. If you want to see more most profitable cheap stocks to buy, the risk/reward, and methodology of this list, go directly to 11 Most Profitable Cheap Stocks to Buy.
Although they have downside if they do not meet expectations, the following is a list of stocks that have competitive advantages that could be candidates for investment in the long term. They rank among the most profitable companies in the United States in 2022.
5. The Home Depot, Inc. (NYSE:HD)
Net Income (TTM) as of October 31, 2022: $17.10 billion
The Home Depot, Inc. (NYSE:HD) is the leading home improvement retailer in the United States with substantial scale and normalized earnings power. Although demand has softened given rising interest rates have weakened the housing market, The Home Depot, Inc. (NYSE:HD) nevertheless had trailing net income of $17.10 billion as of October 31, 2022 according to YCharts. For the future, analysts see The Home Depot, Inc. (NYSE:HD)’s earnings rising with consensus estimates of $15.49 per share for 2022, $16.67 per share for 2023, $16.81 per share for 2024, and $17.74 per share for 2025.
4. Meta Platforms, Inc. (NASDAQ:META)
Net Income (TTM) as of December 31, 2022: $23.20 billion
Meta Platforms, Inc. (NASDAQ:META) ranks #4 on our list of 11 Most Profitable Cheap Stocks to Buy given its net income of $23.20 billion for the last four quarters. Although the social media giant’s profit for the last year is considerable, Meta Platforms, Inc. (NASDAQ:META)’s net income would have been even higher if the company had not spent substantial amounts building the metaverse. In the fourth quarter, the company’s Reality Labs lost $4.28 billion, bringing the unit’s total losses to $13.72 billion for 2022. If the metaverse is a success financially, Meta Platforms, Inc. (NASDAQ:META) could benefit in the long term. Shares currently have a forward P/E of 15.41.
3. Bank of America Corporation (NYSE:BAC)
Net Income (TTM) as of December 31, 2022: $27.53 billion
Bank of America Corporation (NYSE:BAC) is one of the most profitable companies in the United States thanks to its substantial scale and its strong business. For the trailing twelve months as of December 31, 2022, Bank of America Corporation (NYSE:BAC) earned $27.53 billion according to YCharts, allowing the bank to more than support its annual dividend of $0.88 per share. If the economy doesn’t slow too much, Bank of America Corporation (NYSE:BAC) has the potential in fact to raise its dividend this year given its earnings power.
2. JPMorgan Chase & Co. (NYSE:JPM)
Net Income (TTM) as of December 31, 2022: $37.68 billion
JPMorgan Chase & Co. (NYSE:JPM) was the most profitable ‘big four’ American bank in 2022 with trailing twelve months net income of $37.68 billion according to YCharts. JPMorgan Chase & Co. (NYSE:JPM) is also trading at a fairly attractive valuation in terms of the long term with a forward P/E ratio of 10.50. Although an economic slowdown could be a headwind, JPMorgan Chase & Co. (NYSE:JPM) has long term EPS growth potential if it maintains its market share.
1. Alphabet Inc. (NASDAQ:GOOG)
Net Income (TTM) as of December 31, 2022: $59.97 billion
Alphabet Inc. (NASDAQ:GOOG) is a stock that faces competition given Bing’s impending incorporation of ChatGPT, which many users find useful even if it makes a lot of mistakes. Nevertheless, Alphabet Inc. (NASDAQ:GOOG) has its own AI technology in Bard which the company plans to launch this year and as of February 10, the tech giant’s stock has a forward P/E ratio of 15.58. Alphabet Inc. (NASDAQ:GOOG) has been one of the most profitable companies in the world in 2022 with net income of almost $60 billion according to YCharts. As a result, Alphabet Inc. (NASDAQ:GOOG) ranks #1 on our list of 11 Most Profitable Cheap Stocks to Buy.
Polen Global Growth Strategy commented on Alphabet Inc. (NASDAQ:GOOG) in a Q4 2022 investor letter,
Alphabet Inc. (NASDAQ:GOOG) revenues were up 11% constant currency with a 6% FX headwind to reported revenue growth during the most recent quarter. This was a deceleration in growth and Operating Income declined year over year, but this was due to incredibly difficult comparisons from the prior year. On a two-year basis, Total Revenue, Search Revenue, and YouTube Revenue all grew at roughly a ~20% CAGR, as did Operating Income. The Google Cloud Platform continued to grow at a strong pace. Margins expanded significantly last year given the incredibly strong growth and are now falling back to a more normal level as revenue growth moderates on those tough comps. While management did note a small impact from the softening economic environment (ad budgets are easy to adjust down and then back up as we saw during the pandemic), we believe underlying trends in the business remain healthy for the long term.
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