Three Stocks That May Be Priced Below Their Estimated Value In January 2025

As we step into the new year, investors are keeping a close eye on the stock market, seeking opportunities to buy undervalued stocks. Morningstar's latest analysis has identified three stocks that are estimated to be trading below their fair value in January 2025. Let's dive into the details and explore why these stocks might be attractive buys.



Alphabet, the parent company of Google, is trading at a significant discount to its estimated fair value. Despite facing regulatory challenges and increased competition, Alphabet's strong economic moat and wide range of products and services make it a compelling investment opportunity. The company's core search and advertising businesses continue to generate substantial cash flows, while its investments in emerging technologies like AI and autonomous vehicles position it for long-term growth.



Estimated Discount To Fair Value: 14.5%
Alphabet is trading at €26.5, below its estimated fair value of €30.98, representing a 14.5% discount. While not significantly undervalued, the company's earnings are projected to grow at 18.4% annually, outpacing the French market's growth rate of 12.1%. Revenue growth is expected at 14.7%, surpassing the market average of 5.5%. These factors suggest potential for future appreciation despite modest current undervaluation based on cash flows.



Estee Lauder, a leading global beauty company, is another stock trading below its fair value. The company's strong brand portfolio, including iconic brands like Estée Lauder, Clinique, and MAC, has driven consistent growth and profitability. Estee Lauder's wide economic moat and strong balance sheet make it an attractive investment, particularly as the company continues to expand its digital presence and enter new markets.

Estimated Discount To Fair Value: 46.5%
Estee Lauder is trading at CN¥29.55, well below its estimated fair value of CN¥55.2, suggesting it may be undervalued based on cash flows. Recent earnings reports show significant growth, with net income rising to CN¥238.29 million for the nine months ending September 2024, up from CN¥118.54 million a year ago. Despite an unstable dividend history and low future return on equity forecasts, revenue and earnings are expected to grow robustly annually by over 20%.



NXP Semiconductors, a leading provider of high-performance mixed-signal solutions, is trading at a discount to its estimated fair value. The company's strong position in the automotive and industrial markets, as well as its growing presence in the Internet of Things (IoT) and 5G markets, makes it an attractive investment. NXP's wide economic moat and strong financial performance make it well-positioned to capitalize on the growing demand for semiconductors in various industries.

Estimated Discount To Fair Value: 42.8%
NXP Semiconductors is trading at US$26.08, approximately 42.8% below its estimated fair value of US$52.02, indicating potential undervaluation based on cash flows. Despite a modest net income increase, earnings are forecast to grow significantly at 33.39% annually over the next three years, surpassing market expectations and highlighting strong future growth prospects despite current low return on equity forecasts.

In conclusion, investors looking for undervalued stocks in January 2025 should consider Alphabet, Estee Lauder, and NXP Semiconductors. These stocks are estimated to be trading below their fair value, offering potential opportunities for long-term growth and value appreciation. As always, it's essential to conduct thorough research and consider your investment goals and risk tolerance before making any investment decisions.