Nvidia stock is up 200% over the past 12 months. And I’d love to pick ‘another Nvidia’ going into 2024. So, here’s my shortlist of stocks that I think could go the same way, based on valuation, momentum, and quality.
Super Micro Computer
Super Micro Computer has actually outperformed Nvidia over the past 12 months. The stock is up 271.9%.
However, it retains some rather attractive metrics, including a forward price-to-earnings ratio of 20.9 times.
Moreover, it has a price/earnings-to-growth (PEG) ratio of 0.6, suggesting it could be undervalued by as much as 40%.
The company is major provider of high-performance server, storage, networking solutions, and green computing solutions to businesses worldwide, and expects to see strong growth in the coming years.
In fact, we’re looking at an EPS (earnings per share) CAGR of 40% across the medium term. It’s a highly volatile stock, which is a risk if buying at a high, but this company could take off further in 2024.
Li Auto
Li Auto is the cheapest stock I’ve come across using the PEG ratio.
Normally a PEG ratio under one suggests that a company is undervalued, but Li’s PEG is just 0.04. In turn, this could be seen as 96% undervaluation.
This low valuation is made possible by an expected earnings per share growth rate of 594% over the medium term.
While I feel the company’s focus on the Chinese market could hold it back, especially given a slowing domestic economy, it’s got a lot going for it.
Li is the first Chinese EV newcomers to turn a profit, and it’s looking to expand its range to 11 cars by 2025.
Celestica
Celestica is a multinational electronics manufacturing services provider, which has increasingly been using AI to streamline its operations and offerings.
Once again, I like this company’s growth trajectory. Momentum is strong and the stock is already up 176% over 12 months. However, the PEG ratio suggests it could still be undervalued by 33%.
The sector is prone to technological changes and this is an issue for Celestica. But it appears well positioned to benefit from trends in cloud storage and AI adoption.
The firm has also delivered eight consecutive earnings beats. Perhaps it’s time we raised our expectations.
Rolls-Royce
Here’s another stock that has surged this year. Rolls-Royce is up 228% in 2023, but it’s PEG ratio of 0.55 suggests the company could be undervalued by as much as 45%.
Rolls has been benefitting from a stronger than expected recovery in air travel. There are some concerns that an economic downturn in 2024 could spell an end to the bull run. Yet travel demand remains robust.
Moreover, long-term demand for air travel, and thus Rolls-Royce engines, is a huge tailwind. The aviation industry is expecting to require more than 40,000 new aircraft in the next two decades.
