There’s a host of stocks that are priced to perfection, Goldman Sachs said this week. The Wall Street investment bank recently named five other companies, however, that its analysts say still have plenty of growth potential left in them. CNBC Pro combed through Goldman Sachs research to find buy-rated stocks it calls undervalued. They include: Workday, CrowdStrike, CAE, BJ’s Wholesale Club and Ducommun. CAE Buy the dip in shares of the Canadian training and simulation provider for pilots, cabin crew, maintenance technicians and ground personnel, according to analyst Noah Poponak. Goldman says the stock was unfairly punished due to struggles in CAE’s two main divisions, civil aviation and defense. “The struggling defense business has in part caused the stock to de-rate, and valuation levels for the total company are at a sizable discount to comparable peers in the aerospace supply chain,” he wrote. Asv a result, “[w]e believe this valuation multiple doesn’t properly appreciate the growth and margin profile of the Civil segment,” he added. CAE shares are down 17% this year. “A significantly undervalued commercial aerospace asset,” Poponak concluded. BJ’s Wholesale Club BJ’s is definitely firing on all cylinders, analyst Kate McShane says. The warehouse club offers burgeoning membership trends, traffic and other advantages, according to Goldman. McShane, who upgraded BJ’s earlier this year, says the company’s earnings potential is robust due to “strong traffic trends, unit volume growth in grocery categories, and greater customer engagement…” BJ’s recently reported earnings with a strong top and bottom line beat and reaffirmed its forward guidance. Goldman views the quarterly results as proof that growth opportunities remain plentiful. For example, BJ’s continues to open new stores in new markets, she says. “We note BJ’s long runway for new club growth that should continue to gain market share in the future,” McShane said. BJ’s shares are up about 20% this year and have more room to run, McShane noted. Workday Workday is also a growth opportunity thanks to management’s implementation of its strategy, analyst Kash Rangan wrote in a recent note recapping the enterprise cloud management’s second-quarter earnings report. Workday is executing on several growth initiatives and it’s paying off, Goldman said. “We believe Workday is poised to grow into a $20bn+ business catalyzed by financials moving to the cloud following its core [human capital management] marquee product,” he wrote. Rangan praised the company’s ability to hold customers after the pandemic, while continuing to build on “best-in-class retention rates.” Meanwhile, shares of Workday are attractively valued, according to the Goldman. “We believe that there is pent-up demand for large strategic projects pertinent to Workday’s products which should sustain long-term growth over the next several years,” Rangan said. Shares of Workday have soared nearly 25% in the past three months, paring the year-to-date loss to about 5%. CrowdStrike “Based on management comments and industry conversations over the last several weeks, we believe CRWD will be successful at returning to 20%+ revenue growth and 30%+ EPS growth over a 12-24 month time frame. Our view is further informed by CRWD’s earnings commentary, where we believe it is executing a thoughtful playbook on transparency & engagement to regain its footing … after several years of industry leadership.” CAE “A significantly undervalued commercial aerospace asset … The struggling defense business has in part caused the stock to de-rate, and valuation levels for the total company are at a sizable discount to comparable peers in the aerospace supply chain. … .We believe this valuation multiple doesn’t properly appreciate the growth and margin profile of the Civil segment.” BJ’s “We continue to see earnings upside at BJ driven by a better top-line outlook based on continued strong traffic trends, unit volume growth in grocery categories, and greater customer engagement likely in general merchandise categories as a result of the company’s assortment refresh … We note BJ’s long runway for new club growth that should continue to gain market share in the future.” Workday “We believe WDAY is poised to grow into a $20bn+ business catalyzed by financials moving to the cloud following its core HCM marquee product … We believe there is pent-up demand for large strategic projects pertinent to WDAY’s products which should sustain long-term growth over [the] next several years. WDAY’s best-in-class retention rates, success within its cross-sell motion & early adoption of gen-AI services internally offer viable areas of leverage.” Ducommun “Strong growth outlook. We expect DCO to benefit from its exposure to aerospace original equipment as the OEMs ramp up production significantly to meet strong demand. DCO is growing its aerospace aftermarket, where fundamentals are strong. Its defense business has recently seen pressures, but recent orders and easier compares should accelerate that segment.” Read more about this call here.
Source Agencies
