3 Strong Buy Undervalued Stocks Right Now

Zacks screened 50 stocks with a #1 Strong Buy rank, P/E below 20 and price-to-sales below 1.0, highlighting ADM, Delek US Holdings and Sanmina as undervalued ideas. ADM is expected to grow earnings 52.2% this year while trading at a 0.5x P/S ratio and yielding 2.4%; Delek's consensus EPS estimate rose to $15.83 from $11.93, implying 139.8% earnings growth, while its forward P/E is 5.3x. Sanmina, positioned to benefit from AI data-center spending, is projected to double earnings to $12.11 from $6.04 in 2025 and trades at a 0.8x P/S ratio.

Analysis

The screening signal itself is not investable: estimate revisions tend to be most useful when they identify an inflection before consensus margins normalize, not after cyclical earnings have already accelerated. For ADM, the key question is whether improved processing economics are translating into durable segment profitability and cash conversion; a commodity-margin recovery that is not accompanied by lower working-capital needs should not earn a multiple rerating. Watch peer crush spreads and management’s return-of-capital cadence rather than headline EPS revisions.

DK is the highest-beta expression of refining strength, but also the most vulnerable to a normalization in regional product differentials, unplanned downtime, or balance-sheet constraints. Small refiners can underperform VLO and PSX even in a constructive fuel market when maintenance, renewable-fuel execution, or debt service absorbs incremental cash flow. Over the next 1-3 months, crack-spread direction and refinery utilization matter more than the apparent earnings multiple; over 6-18 months, leverage reduction is the gating factor for equity durability.

SANM offers a more differentiated AI-adjacent exposure than server OEMs because incremental data-center programs can improve factory utilization without requiring it to carry hyperscaler demand risk on its own balance sheet. The upside requires evidence that higher-complexity programs lift operating margin rather than merely revenue, which would support a valuation convergence toward better-regarded manufacturing peers such as CLS, FLEX and JBL. QBTS has no fundamental read-through from this screen and should not be grouped with AI infrastructure manufacturers.

Consensus is likely underestimating the distinction between "low multiple" and normalized free-cash-flow yield. A broad risk-off move in AI hardware would create a better SANM entry if order visibility remains intact, while a sharp decline in gasoline/distillate cracks would expose DK’s earnings sensitivity faster than sell-side estimates usually adjust.

Key Decisions for Investors

• Initiate a 3-6 month long SANM / short FLEX pair only after SANM reports stable-to-higher operating margin and backlog/order visibility; target 15-20% relative upside from AI-program mix recognition, with exit if margin guidance declines or the pair loses 10%.
• Maintain DK as a tactical, not core, long through the next refining-margin and utilization data cycle; size at half a normal energy position and take profits into crack-spread strength. Exit on a sustained weakening in Gulf Coast cracks or adverse turnaround guidance; downside can be materially larger than peers given operating and balance-sheet sensitivity.
• Prefer VLO or PSX over DK for a lower-volatility long refining allocation if the objective is continued product-tightness exposure rather than maximum earnings beta. Reassess the preference if DK demonstrates sustained free-cash-flow conversion after maintenance and debt obligations.
• Place ADM on a 1-3 month watchlist rather than buying solely on revisions: upgrade to a long only if segment margins and operating cash flow improve concurrently. A deterioration in crush spreads, inventory build, or another reduction in return-of-capital capacity would falsify the recovery thesis.
• Do not establish exposure to QBTS based on this item; require independently verified bookings, funding runway, and commercial revenue conversion before treating quantum computing as an AI-related substitute trade.