Is WESCO International, Inc. (WCC) the Most Undervalued Growth Stock to Buy Now?

Yahoo

23-04-2025

We recently published a list of . In this article, we are going to take a look at where WESCO International, Inc. (NYSE:WCC) stands against other most undervalued growth stocks to buy now.
Growth stocks are companies that grow their revenues and earnings at a faster rate than the overall market does. To identify the true growth stocks, we believe it is important to use a high enough benchmark over a long enough period. In this case, we define growth stocks as companies that managed to achieve a 5-year revenue compounded annual growth rate (CAGR) of at least 20%. It is obvious that all else equal, investors would prefer growth stocks, but the truth is that their high valuations and perceived expensiveness may often make them less attractive. It is not rare that high-growth companies end up underperforming simply because their initially high forward P/E ratio gradually contracts over time, partially or entirely offsetting the contribution of high earnings growth. So, the ultimate grail of investing consists in identifying undervalued growth stocks that would continue to grow rapidly and at the same time maintain or even expand their trading multiple.
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The growth factor has underperformed year-to-date as the entire US stock market has retracted by more than 15% since its early 2025 highs. The growth stocks performed worse than the market because capital flows to safety assets such as defensive value stocks and gold; the latter is up more than 30% this year, and its price returns actually exceed those of the entire US stock market over the last 10 years. Such situations are rare, and the truth is, by the time growth stocks become cheap enough, many retail investors are no longer willing to buy. This is exactly what's happening now, as the CNN Fear & Greed index shows a value of 20/100, showcasing an 'Extreme Fear' in the markets. This public fear is amplified by the tariff turmoil, especially as the broader market is showing a 'Death Cross' on the technical charts. Similar to Warren Buffett's teachings to be greedy when others are fearful, we maintain our optimistic stance for the long-term financial and economic health of the US and its stock market.
The emergence of the 'Death Cross' signal on the technical chart turns out to be not as scary as perceived by the masses – empirical research shows that the broader market is actually expected to post a positive return of 1% over the 50 days, following the crossing of the 50 daily simple moving average below the 200 daily one, which already occurred on April 11. We don't claim that history will repeat itself this time; we want to illustrate that this widely discussed and feared event does not have much substance behind it.
Moreover, the US economy remains resilient, all while President Trump removed his foot off the tariff gas pedal and is gradually granting exemptions to key consumer products like electronic devices. Employment data has been one of the most reliable indicators of recessions, and the latest US data shows that March employment did not show any sequential decline compared to February and is only marginally below the 2023-2024 level. Most of the decline compared to 2023-2024 comes from the public sector and only impacted a minority of workers, which is not enough to trigger a widespread economic slowdown.
The US administration is hinting towards a possible agreement between Ukraine and Russia, which could lead to a ceasefire and a gradual return of US businesses to Russia. Such an event would induce a one-time positive shock to the market. Russia represents a giant 150 million consumer market that is significant for many US businesses. Second, the end of the conflict could very likely provide relief for energy prices around the globe, and especially in Europe. Lower energy prices are congruent with more consumer purchasing power and wider business profitability – both these factors should drive corporate earnings and valuations higher.
With that being said, the key takeaway is that markets currently reflect close to peak pessimism, all while the economic situation in the US and around the world isn't materially worse than it was last year. Such a scenario is highly favorable for growth stocks – not only does the currently depressed market offer more undervalued candidates to invest in, but also hints towards a potential economic acceleration if Russia and Ukraine do reach a deal under the supervision of the US administration.
To compile our list of most undervalued growth stocks, we used a stock screener to filter for companies that have at least 20% revenue CAGR in the last 5 years, and that trade below 15x forward P/E. Then we compared the list with our proprietary database of hedge funds' ownership and included in the article the top 10 stocks with the highest number of hedge funds that own the stock as of Q4 2024. The stocks are ranked in descending order of their forward P/E ratio.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter's strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points ().
A team of professionals operating high and medium voltage project design.​​WESCO International, Inc. (NYSE:WCC) is a distributor of electrical, industrial, and communications products, as well as maintenance, repair, and operations (MRO) supplies. The company's competitive advantage is based on its global presence and ability to serve a diverse clientele, including commercial and industrial businesses, contractors, government agencies, institutions, telecommunications providers, and utilities. WCC ranked 6th on our recent list of 10 Best Economic Recovery Stocks to Buy.
WESCO International, Inc. (NYSE:WCC) returned to sales growth in Q4, driven by over 70% growth in global Data Center business and 20% growth in Broadband business, along with positive momentum in Electrical and Electronics Solutions. For the full year 2024, the company delivered record free cash flow exceeding $1 billion (154% of adjusted net income), while reducing net debt by $431 million. The company also made significant progress on enterprise-wide digitalization efforts and business transformation, with technology and capabilities built more than halfway complete.
Looking ahead to 2025, WESCO International, Inc. (NYSE:WCC) expects organic sales growth of 2.5% to 6.5% with operating margin expansion across all three business units. The company plans to generate $600-800 million in free cash flow and increase its common stock dividend by 10% while continuing share buybacks. Management believes WCC is well-positioned for outsized growth driven by secular trends in AI-driven data centers, increased power generation, electrification, automation, and reshoring, with a strong pipeline of strategic acquisitions aligned with expanding service offerings. With strong guidance ahead and a single-digit forward P/E, WCC ranked third on our list of the most undervalued stocks to consider.
Overall, WCC ranks 3rd on our list of most undervalued growth stocks to buy now. While we acknowledge the potential of WCC to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than WCC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.