With markets at a potential turning point, value stocks are looking increasingly attractive. Historically, stocks with lower forward price-to-earnings (P/E) ratios have outperformed their pricier counterparts, and analysts believe we’re entering a phase where that trend will resume.
Bank of America’s head of U.S. equity and quantitative strategy, Savita Subramanian, noted that since 1986, value stocks have beaten growth stocks by an average of 4.6 percentage points per year. While expensive growth stocks had the upper hand over the past six months, that dynamic may be shifting. If the Federal Reserve holds steady on interest rates and inflation remains persistent, value could regain leadership.
Below are three undervalued stocks with strong forward earnings yields and catalysts that could drive significant upside.
Charter Communications (CHTR) – Undervalued in Telecom with Improving Trends
Charter Communications has quietly surged 25% over the last year, but analysts still see plenty of room for growth. The stock’s forward earnings yield sits at 10.7%, making it an appealing value play in the telecommunications sector.
One of the biggest concerns for Charter last year was the expiration of the Affordable Connectivity Program (ACP), which provided broadband subsidies for low-income households. However, KeyBanc analyst Brandon Nispel sees subscriber trends improving in 2025, even without ACP. He expects rural broadband additions to accelerate, helping offset any lingering headwinds.
Beyond subscriber growth, Charter’s focus on cost efficiency and EBITDA expansion is another reason to be bullish. Nispel upgraded the stock to overweight in December, with a price target of $500—implying about 39% upside from current levels. With improving broadband trends and underappreciated cost controls, Charter looks like a solid value pick.
First Solar (FSLR) – A Misunderstood Solar Play with Big Upside
Solar stocks have struggled in recent months, but First Solar’s fundamentals remain strong. Shares of the company are up just 1% over the past year, yet it boasts a forward earnings yield of 12.9%, making it one of the cheapest names in the clean energy space.
One of the biggest concerns weighing on First Solar has been the potential expiration of the 45X advanced manufacturing production credit, which provides subsidies for solar manufacturing under the Inflation Reduction Act. However, Mizuho’s Maheep Mandloi believes the market has overreacted to this risk. Even if 45X expires after 2026, Mandloi sees tariffs and improved pricing power helping First Solar maintain profitability.
Mizuho upgraded the stock to outperform from neutral in February and raised its price target to $259 from $218—implying 62% upside from current levels. With strong long-term demand for solar energy and a clearer post-2026 outlook, First Solar looks like an overlooked value play.
CVS Health (CVS) – A Turnaround Story Gaining Momentum
CVS has had a rough year, with the stock down nearly 14% in the past 12 months, but recent developments suggest it may be poised for a comeback. The company’s forward earnings yield sits at 10.7%, and after a strong Q4 earnings report, shares jumped 22% in a single week—a sign that investors are starting to take notice.
One of the biggest changes at CVS has been a leadership overhaul. The company hired David Joyner as CEO of its pharmacy benefits division in October, and analysts see this as a positive step toward stabilizing operations. Cantor Fitzgerald’s Sarah James upgraded CVS to overweight from neutral following its latest earnings, citing increased confidence in a successful turnaround.
James also raised her price target to $71 from $62, about 8% above the stock’s latest close. With cost trends improving and a more capable executive team in place, CVS looks like an undervalued stock with a clear path to recovery.
Final Thoughts
Value stocks are starting to regain favor, and these three names stand out as compelling opportunities. Charter Communications is benefiting from improving broadband trends and cost efficiencies, First Solar has been unfairly punished over subsidy concerns, and CVS is making meaningful progress on its turnaround. With attractive valuations and solid catalysts, these stocks could be well-positioned to outperform in 2025.
