3 Affordable Stocks You Should Consider Buying Now

In the stock market, there are both high-priced and low-priced stocks, but understanding which ones are still worth purchasing is challenging. It's essential to note that "cheap" and "expensive" here refer not to the share price but to the company's overall valuation, which can sometimes lead to stocks with higher prices per share being deemed "cheap" based on their growth potential.

Right now, three stocks stand out as both affordable and excellent investment opportunities: Taiwan Semiconductor Manufacturing (TSM), Alphabet (GOOG, GOOGL), and Adobe (ADBE). These companies have experienced significant sell-offs in recent weeks, making their current prices appealing for investors looking to make a smart purchase.

Valuations Compared to the S&P 500

To assess these companies, we can look at their forward price-to-earnings (P/E) ratios, which are preferable because they provide a future outlook rather than reflecting past performance. Typically, the market is forward-thinking. With the S&P 500 currently trading at a P/E ratio of 21, all three companies are priced lower than this benchmark, with none exceeding a ratio of 20.

Although the difference is not vast, the fact that these stocks trade at a slight discount suggests that investors may expect them to grow at a slower pace than the broader market. This assumption is misguided, as all three of these companies are poised for substantial growth.

Reasons for Their Current Discounted Prices

Taiwan Semiconductor (TSMC) has the strongest case for a premium valuation given its forecasted significant growth over the coming five years. As the largest semiconductor foundry globally, TSMC produces chips for a variety of tech companies lacking their own manufacturing capabilities. This unique position allows TSMC to be well-informed about industry trends and future demands.

Management anticipates nearly a 20% compound annual revenue growth rate over the next five years, significantly outpacing the average market growth rate of 10%. This potential growth doesn't seem to be reflected in TSMC's current stock price, indicating a prime buying opportunity.

Alphabet might not have the same rapid growth as TSMC, but it boasts a robust advertising business that typically achieves double-digit growth each quarter. Projections show similar growth rates of 11% for 2025 and 2026, with already expected faster earnings per share (EPS) growth attributed to efficiency improvements and share repurchases.

Lastly, Adobe is viewed less favorably by some investors, particularly regarding its potential for AI disruption. Despite this perception, Adobe reported a 10% year-over-year revenue increase in its fiscal 2025's first quarter. Its Firefly AI initiative is notably leading the market.

To further boost its EPS, Adobe is pursuing an aggressive share buyback strategy, having repurchased 7 million shares recently. With approximately 435 million shares outstanding, this signals plans to buy back around 6% of its shares this year. Coupled with steady revenue growth of about 10%, Adobe is set to enhance earnings growth in the coming years.

Although none of these companies will be the fastest-growing stocks in the market, each has strong fundamentals and growth prospects, indicating potential to outpace market averages moving forward. Now is an ideal time to consider acquiring these stocks, as such favorable prices may not last long.

stocks, investing, valuation