Block (XYZ)
Down over 70% in the last 5 years, Block has a low valuation relative to its EPS growth forecasts. Peers like Paypal (PYPL) have a Price to Earnings (PE) of 8.5 and forecasted EPS growth of around .5% in the next year, giving it a PEG ratio of 17.8 over that time. In contrast, Block’s PE of 13 and EPS growth estimates of 47% over the next year gives XYZ stock a PEG of 0.3 which is significantly better than PayPals. You want your PEG ratio to be lower because it means your valuation is much lower than its forecasted growth over the course of a year. Blocks Debt to Equity around 40% is also exactly where you want it to be. Given Block’s undervaluation by this metric in combination with it’s latest earnings beats and overall annual industry growth forecasts of ~12%, we have rated it a low risk-high reward stock complete with a Strong Buy rating. Analysts have also rated Block a Strong Buy with a +36% one year forecast.
Reddit (RDDT)
Reddit stock being on an ‘undervalued’ list might come as a surprise given it’s current valuation of a 55 PE, but it’s Reddit’s current earnings estimates over the next few years that really start to make it look like a bit of a bargain at that valuation. Given the 55 PE and it’s incredible 57% estimated improvement to earnings in 2026 alone, this gives RDDT stock a PEG ratio of 0.96 which sounds average, except for the fact that that in 2027 it’s compound at a 40% rate on top of that. Given the internet software and services industry PEG has hovered around 2.3 and the IT sector around 2.4, RDDT’s impressive earnings growth really starts to make sense at its current valuation. It is important to note that these big earnings growth estimates are largely down to it’s relatively small EPS thanks to it’s recent breakeven, but these days companies at this stage usually have valuations much higher than 55 (for example, when Tesla posted it’s first profitable year in 2020, it’s PE was well over 900). On top of all that, RDDT has beat both of its last 2 earnings calls and analysts are still continuing to revise Reddit’s earnings forecasts upwards. Analysts have rated RDDT stock a Moderate Buy with a +62% one year forecast, and we have rated it a Buy with a +29% one year forecast. Down over 39% year to date, we have put Reddit stock as a medium risk, high reward stock.
Nu Holdings (NU)
With a PE of 29 and EPS growth forecasts of +65% for the next year, Nu Holdings represents great value when compared to peers like SoFi Technologies. NU currently has a PEG ratio around 0.45, whereas SOFI’s is around 0.94 at a PE of 51 with +54% earnings growth forecasts over the next year. This means NU’s valuation is lower than SOFI’s while having higher earnings growth estimates. That said, SOFI has been able to increase its customer base by around 35% last quarter while NU added 31%. Down over 17% this past month but still up 43% this past year, NU has beat its last 3 earnings calls and appears to be a great value to investors looking to buy the recent dip. Another bullish sign is the broader fintech industry in general, which itself is expected to enjoy a 25% Compound Annual Growth Rate (CAGR) out to 2033 by some estimates. Analysts have rated Nu Holdings a Strong Buy with a one year average forecast of +31%. We put NU as a medium risk, high reward stock and have also rated it a Strong Buy with a +36% one year forecast.
