These Metrics Identify Only 10 Ai-related Stocks That Are Undervalued – Take A Look

An Introduction

If you’re looking for AI companies primed for revenue and earnings growth, strong profitability, and upward analyst revisions, consider investing in one or more of the stocks highlighted in this article based on their current stock price relative to their forecast earnings growth over the next 12 months, i.e. their PEG ratio, and also the magnitude of their recent price change to evaluate the extent to which the stock is overbought or oversold; and the degree to which the stock has been shorted by traders.

What Is the PEG Ratio?

The PEG ratio:

• provides a simple way for an investor to calculate how cheap a stock is relative to its growth rate by building upon a stock’s current price-to-earnings (P/E) ratio by factoring in its earnings growth prospects in the ensuing year,
• determines if a stock is trading at, above, or below, fair value and if the stock is priced above, or below, the industry median.
  • A PEG ratio below 1.0 suggests that the stock price is undervalued relative to its expected future earnings growth. In other words, the market may not fully account for the company’s growth potential.
  • Conversely, PEG ratios above 1.0 indicate that the stock price might be overvalued, as it isn’t necessarily supported by growth forecasts,

A PEG ratio should be used along with an analysis of the company’s balance sheet, debt burden, and cash flow and other valuation metrics that use the income statement and it’s important to understand things like a company’s competitive advantage, its addressable market, and its long-term growth prospects.

What Is the Relative Strength Index (RSI)?

The relative strength index or RSI as described by Investopedia is “A momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can have a reading from 0 to 100.”

Simply put:

• If the RSI indicator is showing a reading of 70 or higher (a conservative reading of a minimum of 65 is acceptable) it means the stock is in overbought territory and it’s now likely that a pullback is coming soon and, as such, it would be an ideal time to exit and wait for an opportunity to re-enter in the future.
• If the RSI is showing a reading of 30 or below it means the stock is now in oversold territory and could be considered undervalued and is due for a bounce higher and, as such, it would be a great time to enter into a position or add to an existing position.

What Is Short Interest?

Short interest is the number of shares that have been sold short but have not yet been covered or closed out and is usually expressed as a percentage, i.e. the number of shorted shares divided by the number of shares outstanding and is an excellent short-term indicator of market sentiment.

Below is a list of the 10 major AI stocks with the best PEG ratios, in descending order, along with their relative strengths and the extent to which the stock is being shorted:

1. Advanced Micro Devices (AMD): PEG Ratio: 0.57
   • Relative Strength Index (RSI): 45.7
   • Short Interest (SI): 3.0%
2. Taiwan Semiconductor (TSM): PEG Ratio: 0.62
   • RSI: 43.6
   • SI: 0.70%
3. Nvidia (NVDA): PEG Ratio: 0.93
   • RSI: 54.8
   • SI: 1.1%
4. DocuSign (DOCU): PEG Ratio: 0.95
   • RSI: 34.8
   • SI: 4.1%
5. Uber Technologies (UBER): PEG Ratio: 0.96
   • RSI: 67.2
   • SI: 2.9%
6. Tower Semiconductor (TSEM): PEG Ratio: 1.09
   • RSI: 41.1
   • SI: 1.1%
7. UiPath (PATH): PEG Ratio: 1.13
   • RSI: 48.8
   • SI: 6.8%
8. Workday (WDAY): PEG Ratio: 1.18
   • RSI: 49.7
   • SI: 4.3%
9. Qorvo ((QRVO): PEG Ratio: 1.23
   • RSI: 46.9
   • SI: 9.8%
10. Alphabet (GOOGL): PEG Ratio: 1.24
    • RSI: 41.6
    • SI: 0.50%

Please keep in mind that the above PEG ratios are the current stock prices of the day relative to the 12-month earnings estimates of the company and that they will vary throughout the trading day as the company’s stock price fluctuates – the PEG ratio will increase as the stock price rises and decrease as the stock price falls.

Conclusion

The above analysis provides the answer to the opening statement about looking for AI companies primed for revenue and earnings growth, strong profitability, and upward analyst revisions. You now have a short list from which to do your own due diligence before proceeding further.