The 7 Most Undervalued Mid-Cap Stocks to Buy Now

Stocks to buy

It’s up for debate whether the stock market downturn has reached or is close to reaching the “bottoming out” stage, but there are many opportunities out there. While most of the best opportunities are among stocks of the small-cap/”unknown” variety, there are also plenty of undervalued mid-cap stocks to buy now trading at low valuations.

Although perhaps not to the extent seen with smaller names, many mid-caps, or stocks with market caps of between $2 and $10 billion, have become oversold, pushed to super-low forward valuations.

Inflation, interest rates, and recession worries appear to have been priced into them, and then some. Overly discounted, this has created a situation where the risk and return proposition weighs heavily in your favor.

Why? Once current uncertainties pass, each of these seven undervalued mid-cap stocks to buy could experience a significant level of price appreciation. Ahead of this potentially playing out, consider adding them to your portfolio.

BYD Boyd Gaming $47.24
COKE Coca-Cola Consolidated $416.98
DVA DaVita $86.03
GHC Graham Holdings $535.34
NXST Nexstar Media Group $172.67
PBH Prestige Consumer Healthcare $50.48
SFM Sprouts Farmers Market $27.50

Boyd Gaming (BYD)

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If you believe that the next gaming industry downturn will not be as severe as the late 2000s downturn. If yes, Boyd Gaming (NYSE:BYD) may be the best way to make that wager. Based in Las Vegas, Boyd owns what are known as “locals casinos” in its hometown, along with 17 regional gaming properties outside of Nevada.

Per JMP Securities’ Jordan Bender, Boyd’s heavy exposure to the Vegas locals market is a positive. Not only do macro factors remain healthy in Nevada. The continued growth in Nevada’s population serves as a long-term tailwind for the company’s core business.

Trading for just 8.1 times earnings, investors are pricing BYD stock as if a major earnings drop is in the cards. If earnings hold steady over the next year, and the company achieves further success with its online gaming segment, the market may decide to re-rate the stock. At the moment, BYD is one of the top undervalued mid-cap stocks to buy.

Coca-Cola Consolidated (COKE)

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Blue chip Coca-Cola Company (NYSE:KO) may be a blue chip and a dividend aristocrat. However, investors looking for a defensive stock in today’s bear market may want to choose Coca-Cola Consolidated (NASDAQ:COKE) instead.

Why buy shares in Coke’s largest bottler, instead of Coca-Cola itself? Mainly, valuation. KO stock’s high-quality bona fides are fully reflected in its current valuation (about 23 times earnings). While not overvalued per se, a further rise in interest rates could put more pressure on its valuation.

In contrast, COKE stock trades at a discounted valuation of 13.8x earnings. Coca-Cola Consolidated’s current valuation may leave it at less risk of multiple compression. Not only that, it leaves it well-positioned to benefit from multiple expansion, once the bull market returns. Already a strong performer over the last decade, moving up from small-cap to mid-cap, COKE still stands to keep delivering high returns.

DaVita (DVA)

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DaVita (NYSE:DVA) is one of the best undervalued mid-cap stocks to buy. Shares in the kidney dialysis center operator plunged due to declining earnings over the past few quarters. This may appear to be a red flag. However, the situation may not be as dire as it may seem at first glance.

As InvestorPlace’s Will Ashworth argued last month, while earnings per share (or EPS) were down last quarter, DaVita did manage to beat sell-side EPS estimates. Furthermore, the company’s EPS is expected to recover in 2023, rising to $9.81, well above the $8.90 in diluted EPS reported in 2021.

With a recession-proof business, and Warren Buffett’s seal of approval, DVA stock offers investors strong fundamentals at a rock bottom price. Its shares currently trade for just 8.8 times the above-mentioned 2023 EPS figure.

Graham Holdings (GHC)

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Known as the The Washington Post Company until 2013, upon the sale of its famed newspaper to Jeff Bezos, Graham Holdings (NYSE:GHC) is often considered a “mini-Berkshire,” and not just because of Warren Buffett’s 40-year association with the company.

Over the last decade, Graham Holdings has increased its diversification efforts considerably. Beyond its move decades back into broadcasting and test-prep (Kaplan) now owns a slew of small industrial companies, a Washington, D.C.-area automotive dealership chain, and a digital advertising firm, among other holdings.

With a forward valuation of 9.6 times estimated earnings, GHC stock continues to have a “conglomerate discount” applied to it, as was the case when I last wrote about Graham Holdings back in 2020. However, considering its history of spin-offs, like Cable One (NYSE:CABO) in 2015, Graham could eventually decide to spin-off Kaplan (its largest unit), helping to unlock value for shareholders.

Nexstar Media Group (NXST)

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Nexstar Media Group (NASDAQ:NXST) is a great way to make a contrarian wager on the future of television broadcasting. This undervalued mid-cap stock to buy and owner-operator of TV stations is generating considerable cash flow right now. This is due to both traditional TV ad revenue, plus broadcast retransmission fees received from cable operators.

The market is not confident such high profitability can continue. Hence, NXST stock at a very low valuation, even when you account for next year’s expected decline in EPS. Shares trade for just 8.3 times estimated 2023 earnings. However, this may be an overreaction.

Why? Cord cutting is a major headwind, yet there is a big tailwind to counter it. That would be the rollout of NEXTGEN TV, which opens the door for further monetization of its broadcast spectrum assets. This could help prevent a big decline in profitability, resulting in the investors giving NXST star a higher valuation.

Prestige Consumer Healthcare (PBH)

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As its corporate name suggests, Prestige Consumer Healthcare (NYSE:PBH) is a provider of over-the-counter (or OTC) healthcare products. Its brands include Chloraseptic, Clear Eyes, Compound W, and Luden’s. It’s another top undervalued mid-cap stock to buy.

A seller of everyday remedies, Prestige will likely fare okay during a recession. Interestingly enough, investors haven’t exactly flocked to PBH stock as a defensive play. Instead, the stock has fallen around 17% in 2022, and now trades at a low multiple for a company in its industry (12 times forward earnings).

Once macro challenges become fully absorbed by the market, and the recovery begins, Prestige shares could move to a valuation more befitting of a consumer staples stock. For example, a move back to a price-to-earnings (or P/E) ratio of 15 would mean a move back to $63 per share. In other words, 25% potential upside compared to PBH’s current stock price.

Sprouts Farmers Market (SFM)

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Shares in high-end grocery chain Sprouts Farmers Market (NASDAQ:SFM) have held up well compared to the overall market. While major indices are down by double-digits since late last year, SFM stock has traded sideways during this timeframe. It’s another undervalued mid-cap stock to take a look at.

However, in the years ahead, Sprouts stock could deliver returns that are far more satisfying. In the near-term, its results could continue to come in stronger than expected. This may enable the stock, trading at a super-low 12.6 times earnings, to see some growth in its forward valuation.

Longer-term, there are two ways Sprouts Farmers Market can move the needle when it comes to EPS growth. First, through organic growth, by which I mean the opening of new stores. Second, through the continuation of management’s SFM stock repurchase program. A higher degree of earnings growth could fuel an even more significant move higher for this undervalued grocery store stock.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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