In my experience as an investor focusing on long-term portfolio expansion, few strategies have been as consistently rewarding as identifying undervalued growth stocks. These are not just companies with strong historical returns; they have forward-looking indicators of expansion, pricing power, and financial health. The secret is to buy them when the market has temporarily overlooked their potential. Today, I’ll walk through two such companies—each currently trading below intrinsic value with long-term upside—while keeping the analysis grounded in US economic conditions and behavioral finance principles.
Understanding Growth at a Reasonable Price (GARP)
I follow the GARP investing philosophy. It merges the principles of value investing with growth investing. That means I look for companies with strong earnings growth but whose stocks trade at reasonable valuations. I quantify this using the PEG ratio:
\text{PEG Ratio} = \frac{\text{Price-to-Earnings (P/E) Ratio}}{\text{Earnings Growth Rate}}A PEG below 1 indicates that the stock may be undervalued relative to its growth. Both companies in this article fit that criterion.
Stock #1: Intel Corporation (NASDAQ: INTC)
Intel is one of the most misunderstood stocks on Wall Street. While market participants rushed toward Nvidia and AMD, Intel quietly built the foundation for a comeback. After years of lagging in advanced chip manufacturing, Intel is transitioning to a foundry model, competing directly with TSMC. For long-term investors, the current valuation represents a buying opportunity.
Financial Overview
| Metric | Value (FY 2024) |
|---|---|
| Market Cap | $150 Billion |
| P/E Ratio | 14.2 |
| PEG Ratio | 0.89 |
| Dividend Yield | 1.6% |
Intel’s earnings per share (EPS) are projected to grow by 16% annually over the next five years, driven by AI and enterprise server demand.
Let’s calculate the intrinsic value using a simple discounted earnings model. Assume earnings grow at 16% for five years, then 5% thereafter, with a discount rate of 9%.
P = \sum_{t=1}^{5} \frac{E_0 \cdot (1+g)^t}{(1+r)^t} + \frac{E_5 \cdot (1+g_2)}{(r - g_2)} \cdot \frac{1}{(1+r)^5}Where:
- E_0 = 2.00 (current EPS)
- g = 0.16, g_2 = 0.05
Using this model, I value Intel around $60/share, while it trades under $35.
Strategic Moats
- US Government Support: CHIPS Act funding ensures strategic support.
- Geopolitical Advantage: US-based chip foundries reduce reliance on Taiwan.
- Vertical Integration: Intel now manufactures and designs chips—cost-effective in the long run.
For investors looking at long-term US industrial resurgence, Intel is an obvious pick.
Stock #2: Etsy Inc. (NASDAQ: ETSY)
Etsy is more than a marketplace—it’s a platform economy focused on artisan commerce. It benefits from the shift toward unique, non-mass-produced products. When US consumers seek personalization, Etsy gains share.
Financial Overview
| Metric | Value (FY 2024) |
|---|---|
| Market Cap | $8.5 Billion |
| P/E Ratio | 18.3 |
| PEG Ratio | 0.82 |
| Active Buyers | 91 Million |
Etsy’s cash flow generation is robust. Free cash flow margin exceeds 20%, rare for an e-commerce company.
Let’s look at a simplified DCF to backtest this valuation.
FCF_t = FCF_0 \cdot (1 + g)^t \text{DCF} = \sum_{t=1}^{10} \frac{FCF_t}{(1 + r)^t} + \frac{FCF_{10} \cdot (1 + g)}{(r - g)} \cdot \frac{1}{(1 + r)^{10}}Assume:
- FCF_0 = 500\text{ million}, g = 0.12, r = 0.10
Etsy’s intrinsic value per share exceeds $120, while it trades near $70.
Why I Believe in Etsy
- High Switching Costs: Etsy sellers build brands on the platform.
- Network Effects: More buyers attract more sellers.
- US Consumer Shift: The middle class values uniqueness over mass retail.
During inflationary cycles, Etsy benefits from seller pricing power, allowing it to expand margins even when input costs rise.
Comparative Table: Intel vs Etsy
| Criteria | Intel | Etsy |
|---|---|---|
| Industry | Semiconductors | E-commerce |
| PEG Ratio | 0.89 | 0.82 |
| Dividend | Yes (1.6%) | No |
| Cash Flow Dependence | Moderate | High |
| Intrinsic Value Gap | $60 vs $35 | $120 vs $70 |
| Strategic Tailwind | US Manufacturing | Personalization Trend |
Final Thoughts
I don’t believe in timing the market, but I do believe in valuation gaps. Both Intel and Etsy show strong fundamentals, yet the market has priced them as if growth is stalled. In reality, each is on the cusp of transformation. These are not meme stocks or hype-driven narratives. They are structurally sound companies in alignment with broader US socioeconomic movements—manufacturing independence and personalized commerce. For a patient investor, they represent rare opportunities.
I plan to hold both for at least five years. And I believe anyone building a US-focused growth portfolio should give these two a close look.
Disclosure: I hold long positions in both INTC and ETSY.
