3 Undervalued S&P 500 Stocks To Buy Right Now

The US stock market, as a whole, doesn’t look particularly cheap today. At present, the median forward-looking price-to-earnings (P/E) ratio across the S&P 500 index is about 19. There are bargains to be found if one looks beneath the surface, however. Here are three S&P 500 stocks that look undervalued today and could be worth buying for the long term.

Alphabet

First up, we have ‘Magnificent 7’ stock Alphabet (GOOG:NASDAQ). It currently sports a forward-looking P/E ratio of just 16.6 meaning that it’s trading at a material discount to the market.

The main reason this stock is trading so cheaply right now is that a lot of investors believe that generative AI poses an existential threat to the company. Today, the way people search for information is changing rapidly.

These fears are probably overblown, however. While apps like ChatGPT and Perplexity are becoming increasingly popular, Google is not going to disappear any time soon.

Meanwhile, Alphabet also has YouTube, its cloud computing division, its Waymo self-driving cars, and now cybersecurity after its recent acquisition of Wiz. So, it has other long-term growth drivers.

Of course, Alphabet is going to have to work hard to fend off competition in the industries it operates in. Looking ahead, there’s no guarantee that it will continue to have success.

I think the tech stock is worth backing here, however. This is an innovative company with the financial firepower to aggressively invest in future growth and maintain its competitive edge.

Dell

Tech hardware specialist Dell (DELL:NASDAQ) looks set to play a major role in the AI revolution in the years ahead. Not only does it provide the hardware necessary to handle demanding data centre workloads (e.g. high-performance servers) but it’s also embedding AI capabilities directly into its PCs and workstations.

The long-term growth potential here doesn’t seem to be reflected in the company’s valuation, however. Currently, Dell trades on a super low P/E ratio of just 11.3.

When you consider that this year Dell’s earnings per share (EPS) are projected to increase 23%, that valuation looks very attractive. Right now, we have a price-to-earnings-to-growth (PEG) ratio of just 0.48 (a ratio under one generally signals that a stock is cheap).

A risk here is lower-than-expected spending on technology in the near term. This scenario could emerge if economic conditions continue to deteriorate.

I think a lot of risk is priced into the stock at current levels, however. And with a dividend yield of 2% on offer right now, I see considerable appeal in the stock today.

Qualcomm

Finally, check out chip stock Qualcomm (QCOM:NASDAQ). It currently trades on a P/E ratio of just 12. Qualcomm may not have the explosive top-line growth of other chip stocks such as Nvidia. But it still has plenty of long-term growth potential.

Looking ahead, its high-performance chipsets are likely to be used to power a wide range of Internet of Things (IoT) applications, from smart home devices to industrial robots. They’re also likely to be used in the automotive world by businesses such as Mercedes-Benz, BMW, Volvo, and Rivian, enabling features like advanced driver assistance systems (ADAS) and autonomous driving.

It’s worth noting that Qualcomm’s earnings are on the rise at the moment. This year, analysts forecast EPS growth of about 28%. Add in the fact that the stock offers a dividend yield of about 2.3% and the setup looks attractive today.

Edward Sheldon has positions in Alphabet