Undervalued US stocks: three real bargains, three caveats

2026-10-26 · By Lubin Danilo, founder of Lubin Investment

In the US, bargains exist, but they often hide a flaw you need to know how to read. Among quality stocks trading low, Booking, Mercury General and Deckers stand out as real opportunities. Firstcash, Autoliv and Las Vegas Sands each carry a measurable weakness that explains their discount.

Why almost nothing is on sale on Wall Street

The US market is the most closely watched in the world. When a company earns a lot of money year after year, thousands of analysts have already spotted it and its price reflects that. This is why a high-quality US stock rarely trades at a low valuation. When it does, there is almost always a reason, and the whole job is to find it.

I judge two things separately. First the quality of the business, a score out of 10 criteria: margins, growth in sales and cash per share, share buybacks, debt, return on capital. Then the price, measured by P/FCF: the share price divided by free cash flow, meaning the cash actually left once every bill is paid. A P/FCF of 10 means you pay ten years of that cash. I took US stocks scored 9 or 10 out of 10 that my tool flags as opportunities, and compared each price with the stock's own history. The last column reads like this: "lowest 2 %" means the price has been lower in only 2 % of past cases.

Stock	Quality score	P/FCF	Position in own history	Size ($bn)
Booking (BKNG)	10 out of 10	13.4	Lowest 2 %	117
Mercury General (MCY)	10 out of 10	4.0	Lowest 7 %	6
Deckers (DECK)	9 out of 10	10.5	Lowest 6 %	12
Firstcash (FCFS)	9 out of 10	11.7	Lowest 2 %	8
Autoliv (ALV)	9 out of 10	11.3	Lowest 7 %	8
Las Vegas Sands (LVS)	9 out of 10	9.0	Lowest 6 %	25

The three real opportunities

Booking (its page) does everything right on paper: free cash flow per share grows 24 % a year over five years and the share count falls 6.5 % a year thanks to buybacks. The model explains why: the traveler pays at booking, the hotel is paid later, so the company collects before it pays. In the second quarter of 2026 its free cash flow reached $3.6 billion, up 16 % according to the release filed with the SEC. Beware of a reading trap: the price of about $156 looks tiny next to the $4,100 of before, but that is the 25 for 1 split of April 2, 2026, not a sale.

What the market punishes is the travel cycle: CEO Glenn Fogel himself cites geopolitical and macroeconomic uncertainty. My reading: the discount is partly deserved for a cyclical business, but its size is excessive against cash that keeps growing 16 %.

Mercury General (page) trades at 4 times its free cash flow, which looks almost too good. You need to understand the mechanism: an insurer collects premiums immediately and pays claims later. When premiums grow (+9.6 % in the second quarter), this gap, the float, inflates free cash without all of it being earned. The right test is the combined ratio, which adds claims and expenses relative to premiums: below 100 %, insurance makes money on its own. Mercury brought it down to 89.9 % from 92.5 % a year earlier, according to its second quarter release. But the comparison benefits from a weak base, with the Los Angeles wildfires having cost about $460 million in the first half of 2025. A real opportunity, with cash less cheap than it looks.

Deckers (page) means Hoka and UGG. Its free cash flow per share grows 49.6 % a year over five years and it holds more cash than debt. What weighs on it: growth is fading. In the quarter ended in September, sales rose 3.5 % to $1.48 billion, against 15.7 % a year on average over five years, with its own online and store sales down according to the release. The market is paying for a brand that is slowing, not one that is collapsing. At 10.5 times its cash, in the lowest 6 % of its history, I find the doubt generously priced in.

The three that call for a caveat

Stock	What is solid	What holds it back	Verdict
Booking	Cash per share +24 %/yr, buybacks	Travel cycle	Opportunity
Mercury General	Combined ratio 89.9 %	Cash inflated by float, wildfires	Qualified opportunity
Deckers	Cash per share +49.6 %/yr, net cash	Sales slowing to +3.5 %	Opportunity
Firstcash	Sales +13.7 %/yr, buybacks	Debt of 3.3 years of cash, limit is 3	Caveat
Autoliv	Buybacks, cash per share +29 %/yr	6.8 % cash margin, sales +6.9 %/yr	Caveat
Las Vegas Sands	$950m buybacks in the quarter	Debt of 4.5 years of cash, flat cash per share	Caveat

Firstcash (page), the pawn lender, posts record third quarter 2026 results, with pawn loans at a record $908 million according to its release. The flaw is in the balance sheet: its debt equals 3.3 years of free cash flow, above my 3 year limit, and it takes 123 days to turn its inventory and loans into cash. A pawn lender ties money up in its loans, which explains that delay, but it makes the company more fragile if credit tightens.

Autoliv (page) makes airbags and seat belts. Its problem is margin: out of $100 of sales, $6.80 ends up as cash, against more than $31 at Booking, because automakers negotiate prices very hard. Its sales grow only 6.9 % a year. It still ticks most of my criteria thanks to buybacks, but its low price reflects a low margin business tied to the auto cycle.

Las Vegas Sands (page) is the most instructive case. At 9 times its cash it looks cheap, yet its price of $35.68 stays above my reasonable buy price of $25.61. The reason: its cash per share has barely moved in five years, and its 33.8 % annual sales growth is inflated by the post Covid recovery. In the third quarter, Marina Bay Sands EBITDA in Singapore fell to $590 million from $743 million, according to the release, while the company repurchased $950 million of shares. A low multiple on cash that does not grow is not an opportunity.

What this list does not say

It does not say to buy. A low price for the quality is a starting point: you then need to know why it is low, which I did case by case here. For another angle on the same universe, read the good Wall Street stocks near their historical lows. Prices move every day: I built my screener to redo this sort on any market, and its logic is detailed in the methodology.

FAQ

Why are so few US stocks undervalued?

Because the US market is the most followed in the world: a quality company is quickly spotted and its price rises. When a quality stock trades low, there is almost always a reason to understand, such as the cycle, debt or a thin margin.

Is a low P/FCF enough to call a stock undervalued?

No. A low P/FCF can hide cash that does not grow, heavy debt, or cash inflated by a temporary gap such as an insurer's float. Read it alongside business quality and the trajectory of cash per share.

Is Mercury General at 4 times its cash really that cheap?

Less than it looks. An insurer collects premiums before paying claims, which inflates free cash. The combined ratio, at 89.9 % in the second quarter of 2026, is a better test of the profitability of the insurance itself.

Did Booking become cheap because its price was divided by 25?

No. The 25 for 1 split of April 2, 2026 multiplied the number of shares without changing the value of the company. What matters is the P/FCF of 13.4, low relative to Booking's own history.

About the author

Written by Lubin Danilo, founder of Lubin Investment. A self-taught individual investor, I find fundamental analysis fascinating, and it has delivered excellent results. For three years now, my performance has beaten the S&P 500. But analyzing every stock took too much time: sites with incomplete data, calculation methods and criteria never aligned with mine. And spotting the best stocks was just as time-consuming, even with my own well-defined checklist. So I put my software development background to work to build this software, base my investment strategy on its results, and share it with people who share the same passion as me. It judges a company's quality and its price separately, using criteria drawn from the financial literature (Warren Buffett, Michael Mauboussin, Aswath Damodaran).