The 3 Best Bargain Stocks to Buy in August 2024

Market Overview - Since July 16, market volatility has increased, with the Nasdaq 100 down 13% from its peak, indicating a correction phase [1] - The economy remains strong, and expectations for rate cuts starting in September are growing, suggesting potential upside for certain stocks [1] Bargain Stocks Performance - In Q2 2024, selected bargain stocks reported revenue growth of at least 8% and earnings growth above 10%, yet they trade below 14 times forward earnings, representing a 25% discount to the market [2] - As long as these stocks continue to perform well, their price-to-earnings (P/E) multiples are expected to expand, closing the valuation gap [2] Celestica (CLS) - Celestica operates in two segments: Advanced Technology Solutions and Connectivity & Cloud Solutions, with the latter experiencing significant growth due to hyperscaler investments [3] - In Q2 2024, Celestica exceeded revenue estimates by $140 million, achieving revenues of $2.39 billion, a 23% year-over-year increase, and adjusted EPS rose to $0.91 from $0.55 in Q2 2023 [4] - The Connectivity & Cloud Solutions segment saw a 51% year-over-year revenue surge, with segment margins improving from 6.0% to 7.2% [5] - Management raised full-year revenue guidance from $9.1 billion to $9.45 billion and adjusted EPS guidance from $3.30 to $3.62, resulting in a forward P/E of 13, indicating a bargain opportunity [6] PayPal (PYPL) - PayPal's new CEO has implemented a plan to revive profitable growth, with Q2 results showing acceleration in growth [7] - The company trades at 11 times FY2024 earnings, which is considered too cheap given its turnaround and growth in transaction margin dollars, which increased from $3.5 billion in Q1 to $3.6 billion in Q2, reflecting an 8% year-over-year growth [8][9] - Management has recognized the stock's discount and increased the buyback program from $5 billion to $6 billion, indicating confidence in future growth [9] Cigna (CI) - Cigna operates two main segments: Cigna Healthcare and Evernorth Health Services, with the latter being a significant growth driver [10] - In Q2 2024, Evernorth's pharmacy benefit services and specialty revenues grew 41% and 18% year-over-year, respectively, contributing to a total revenue increase of 25% to $60.5 billion [11] - Adjusted EPS increased from $6.13 to $6.72, representing a 10% growth, and for FY2024, Cigna expects adjusted EPS of at least $28.40, resulting in a forward P/E of 12, indicating a bargain considering future growth opportunities [12]