The Motley Fool

3 value stocks I’d buy after recent declines

As stock markets have plunged, a handful of high-quality businesses have suddenly become value stocks.

As such, now could be an excellent time for long-term investors to snap up some shares in these highly attractive operations at discount prices.

Claim your FREE copy of The Motley Fool’s Bear Market Survival Guide.

Global stock markets may be reeling from the coronavirus, but you don’t have to face this down market alone. Help yourself to a FREE copy of The Motley Fool’s Bear Market Survival Guide and discover the five steps you can take right now to try and bolster your portfolio… including how you can aim to turn today’s market uncertainty to your advantage. Click here to claim your FREE copy now!

Value stocks on offer

Drax Group (LSE: DRX) is currently one of the market’s most unloved value stocks. Shares in the power plant operator are dealing at a price-to-earnings (P/E) multiple of 6. The stock also commands a price-to-book (P/B) ratio of 0.5.

Value stocks are usually defined as those businesses trading at a discount to book value. It looks as if Drax falls into this bracket.

The question is, does the company deserve this valuation?

It does not seem as if it does. Even in the worst-case economic scenario, the UK will still need electricity, and Drax is one of the country’s largest power plant operators. This suggests that the business will continue to earn revenues no matter how bad the coronavirus outbreak becomes.

On top of the stock’s attractive valuation, the company also offers investors a dividend yield of 8.3%. Therefore, investors will be paid to wait for market confidence to return and the stock to recover.

With electricity demand only growing across the UK, investors might not have to wait for long.

Pubic transport

National Express (LSE: NEX) is one of the most efficient public transport operators in Europe and North America. Last year the business reported an operating profit margin of 8.8% compared to the sector average of 7.8%.

Unfortunately, it’s highly likely that the coronavirus outbreak will hurt the company’s operations. However, public transport is an essential service for many people, and demand is only growing as more and more consumers ditch private cars over environmental concerns.

As such, National Express looks well-positioned to stage a strong recovery when the outbreak dies down, and economic activity returns to normal.

Today investors can buy into this recovery play for just 9.2 times forward earnings. The stock also offers a dividend yield of 5.2%. The payout is covered twice by earnings per share, so it looks quite safe for the time being.

These metrics, and National Express’s position in the public transport industry, make it one of the most attractive value stocks on the market today.

Online delivery

High street sales may suffer as consumers stay home to avoid the virus outbreak, but initial indications suggest online sales could grow. Next (LSE: NXT) could benefit from this trend.

While the company does still have a significant high street presence, around half of the group’s sales now come from its online business.

What’s more, this business is highly cash generative. Management has been returning a large chunk of this cash to investors with dividends and share buybacks.

Not only does Next reward its shareholders more than many of its peers, but the company’s healthy profit margins and cash flows means the firm is well-positioned to weather the storm.

Many of its peers might not be so lucky. That could help the company come out on top when the economy recovers. Next could use its size and scale to grab market share from struggling smaller peers.

Therefore, it could be worth buying a share of this high-quality business after recent declines.

A top stock with enormous growth potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business.

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has been helping it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 alone it returned a whopping £151.1m to shareholders in dividends and buybacks!

And here’s the really exciting part…

We think now could be the perfect time for you to start building your own stake in this exceptional business—especially given the two potentially lucrative expansion opportunities on the horizon that our analyst has highlighted.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Stock… free of charge!

Rupert Hargreaves owns shares in Next. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.