Prediction: These Could Be the Best-Performing Value Stocks Through 2030

Seeking value stocks trading at a discount? These top value stocks could outperform through 2030 through valuation expansion.

| More on:
dividends grow over time

Source: Getty Images

Value stocks can be identified by their low price-to-earnings ratios (P/E). The market has low expectations of the stocks. If their businesses end up performing better than anticipated, their stock prices will experience a nice boost. Here are some of the top value stocks that could outperform through 2030 with the help of valuation expansion.

Empire

As a grocery store chain and the parent company of banners like Safeway, Sobeys, Les Marches Tradition, Thrifty Foods, Fresh Co, and IGA, Empire’s (TSX:EMP.A) earnings should be resilient even when the economy turns south.

Sure enough, the consumer staples stock has supported a growing dividend for 29 consecutive years. At $32.36 per share at writing, it trades at a blended P/E of about 11.7, while it could potentially grow its earnings per share at a rate of about 9% over the next couple of years.

Multiple times since 2020, the value stock was able to trade at 15 times earnings. If it traded at that level today, the stock price would be over $41 per share, equating to upside of 28%. The 12-month analyst consensus price target on Yahoo Finance is more conservative at $37.86, which still represents decent near-term upside potential of 17%. The stock offers a dividend yield of just under 2.3%.

Rogers Communications

Rogers Communications (TSX:RCI.B) also appears to be a cheap stock due to generally higher interest rates since 2022. Although the Bank of Canada cut the policy interest rate by 0.25% this month, it doesn’t make much of an impact compared to the 4.75% raise it made since early 2022. Canadians shouldn’t expect the Bank of Canada to reduce the policy interest rate back to 0.25% any time soon, as the Bank would keep watch on changes in the economic data and make adjustments to the policy interest rate as needed.

Big telecoms generally have large capital investments funded by debt. In the case of Rogers, its long-term debt-to-capital ratio is high at about 72.5%. However, it still maintains an investment-grade S&P credit rating of BBB-.

In a higher interest rate environment, investors have the opportunity to buy Rogers stock at a blended P/E of about 11 at the recent price of $51.88 per share. This is a value stock that can also trade at a P/E of 15 given the right environment.

If it were to trade at a multiple of 15 today, the stock should be at north of $70. So, it’s probably not a coincidence that the 12-month analyst consensus price target on Yahoo Finance is $70.70, which represents nice near-term upside potential of 36%.

It also offers a dividend yield of almost 3.9% sustained by a payout ratio of about 41% of adjusted earnings this year.

Food for thought

The problem with value stocks is that there are reasons for the pressure on the stocks. Furthermore, although they appear to be cheap, it doesn’t mean they can’t get cheaper. There’s also no way of knowing when or if the right catalysts will prop up the stocks and help investors realize sizeable gains.

So, investors should have high conviction and be ready to stay with the stock for years before taking a position. It goes without saying that it always helps if value stocks pay out safe dividends, which provide periodic income for investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng has positions in Rogers Communications. The Motley Fool recommends Rogers Communications. The Motley Fool has a disclosure policy.

More on Dividend Stocks

hand stacks coins
Dividend Stocks

3 Ultra-High-Yield Dividend Stocks You Can Buy and Hold for a Decade

These three high-yield dividend stocks still have some work to do, but each are in steady areas that are only…

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

TFSA: 2 Canadian Stocks to Buy and Hold Forever

Here are 2 TFSA-worthy Canadian stocks. Which one is a good buy for your TFSA today?

Read more »

calculate and analyze stock
Dividend Stocks

This 5.5% Dividend Stock Pays Cash Every Single Month!

This REIT may offer monthly dividends, but don't forget about the potential returns in the growth industry its involved with.

Read more »

Silver coins fall into a piggy bank.
Dividend Stocks

How to Use Your TFSA to Earn up to $6,000 Per Year in Tax-Free Passive Income

A high return doesn't mean you have to make a high investment -- or a risky one -- especially with…

Read more »

path road success business
Dividend Stocks

2 High-Yield Dividend Stocks to Buy Hand Over Fist and 1 to Avoid

High yields are great and all, but only if returns come with them. And while two of these might, another…

Read more »

Man holds Canadian dollars in differing amounts
Dividend Stocks

This 7% Dividend Stock Pays Cash Every Month

A high dividend yield isn't everything. But when it pays out each month and offers this stability, it's worth considering!

Read more »

young people stare at smartphones
Dividend Stocks

GST/HST “Vacation”: Everything Canadians Need to Know

The GST/HST "vacation" is a little treat for the holidays, along with a $250 payment. What should you do with…

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »