10 Best Undervalued Growth Stocks for February 2026
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Explore diverse stock ideas covering technology, healthcare, and commodities sectors. Our insights are crafted to help investors spot opportunities in undervalued growth stocks, enhancing potential returns. Visit us to see evaluations and in-depth market research.
Market Overview & Selection Criteria
In the current market environment, investors are seeking undervalued stocks with strong fundamentals amid volatility in technology, healthcare, and financial sectors. ValueSense's proprietary analysis identifies these top stock picks by screening for high intrinsic value relative to market prices, quality ratings above 6.0, robust ROIC, and growth potential in revenue or FCF. Stocks were selected from curated watchlists emphasizing best value stocks trading below their calculated intrinsic values, using machine learning-driven metrics like ROIC, margins, and debt levels for long-term potential. This methodology highlights investment opportunities across semiconductors, biotech, e-commerce, banking, streaming, autos, and pharma, providing a diversified stock watchlist for educational analysis.
Featured Stock Analysis
Stock #1: Taiwan Semiconductor Manufacturing Company Limited (TSM)
| Metric | Value |
|---|---|
| Market Cap | $1,730.0B |
| Quality Rating | 8.2 |
| Intrinsic Value | $484.8 |
| 1Y Return | 58.8% |
| Revenue | NT$3,818.9B |
| Free Cash Flow | NT$1,019.8B |
| Revenue Growth | 31.9% |
| FCF margin | 26.7% |
| Gross margin | 59.9% |
| ROIC | 38.2% |
| Total Debt to Equity | 18.2% |
Investment Thesis
Taiwan Semiconductor Manufacturing Company Limited (TSM) stands out with a Quality rating of 8.2 and an intrinsic value of $484.8, suggesting significant undervaluation for this semiconductor leader. With a massive Market Cap of $1,730.0B, TSM demonstrates exceptional efficiency through Revenue of NT$3,818.9B, Free Cash Flow of NT$1,019.8B, and Revenue growth of 31.9%. Its FCF margin at 26.7%, Gross margin of 59.9%, and industry-leading ROIC of 38.2% reflect superior capital allocation, while a low Total Debt to Equity of 18.2% underscores financial strength. The 1Y Return of 58.8% highlights momentum in chip demand.
This positioning makes TSM a core holding in technology-focused portfolios, as its high-quality metrics position it for sustained growth in AI and advanced manufacturing.
Key Catalysts
- Explosive 31.9% Revenue growth driven by global chip demand
- Top-tier ROIC 38.2% indicating efficient reinvestment
- Strong 59.9% Gross margin supporting scalability
- Robust NT$1,019.8B Free Cash Flow for dividends and buybacks
Risk Factors
- Geopolitical tensions in Taiwan region
- Cyclical semiconductor industry downturns
- High dependence on key clients like Apple
Stock #2: Micron Technology, Inc. (MU)
| Metric | Value |
|---|---|
| Market Cap | $486.8B |
| Quality Rating | 8.2 |
| Intrinsic Value | $419.0 |
| 1Y Return | 348.5% |
| Revenue | $42.3B |
| Free Cash Flow | $17.3B |
| Revenue Growth | 45.4% |
| FCF margin | 40.9% |
| Gross margin | 45.3% |
| ROIC | 23.4% |
| Total Debt to Equity | 21.2% |
Investment Thesis
Micron Technology, Inc. (MU) earns a Quality rating of 8.2 with an intrinsic value of $419.0, positioning it as a standout in memory chips amid a Market Cap of $486.8B. Key metrics include Revenue of $42.3B, Free Cash Flow of $17.3B, and remarkable Revenue growth of 45.4%, bolstered by FCF margin of 40.9%, Gross margin of 45.3%, and ROIC of 23.4%. The 1Y Return of 348.5% reflects explosive recovery in data center and AI-driven demand, with manageable Total Debt to Equity at 21.2%.
MU's profile appeals to growth-oriented analysis, offering exposure to high-margin memory cycles with strong cash generation potential.
Key Catalysts
- Stellar 348.5% 1Y Return from AI memory boom
- 45.4% Revenue growth fueling expansion
- Impressive 40.9% FCF margin for resilience
- Solid 23.4% ROIC in competitive sector
Risk Factors
- Volatility in memory pricing cycles
- Competition from Samsung and SK Hynix
- Supply chain disruptions in electronics
Stock #3: Alibaba Group Holding Limited (BABA)
| Metric | Value |
|---|---|
| Market Cap | $399.0B |
| Quality Rating | 6.4 |
| Intrinsic Value | $299.8 |
| 1Y Return | 65.0% |
| Revenue | CN¥1,012.1B |
| Free Cash Flow | (CN¥26.9B) |
| Revenue Growth | 5.2% |
| FCF margin | (2.7%) |
| Gross margin | 41.2% |
| ROIC | 10.5% |
| Total Debt to Equity | 25.3% |
Investment Thesis
Alibaba Group Holding Limited (BABA) features a Quality rating of 6.4 and intrinsic value of $299.8 against a Market Cap of $399.0B. Despite negative Free Cash Flow of (CN¥26.9B) and FCF margin of 2.7%, it shows Revenue of CN¥1,012.1B, modest Revenue growth of 5.2%, Gross margin of 41.2%, ROIC of 10.5%, and Total Debt to Equity of 25.3%. The 1Y Return of 65.0% indicates rebound potential in e-commerce and cloud.
BABA provides educational insights into China tech recovery, balancing growth with turnaround dynamics.
Key Catalysts
- 65.0% 1Y Return signaling market rebound
- Stable 41.2% Gross margin in core e-commerce
- Expanding cloud computing segment
- Low 25.3% Debt to Equity for flexibility
Risk Factors
- Negative FCF (CN¥26.9B) from investments
- Regulatory pressures in China
- Slow 5.2% Revenue growth amid competition
Stock #4: Bank of America Corporation (BAC)
| Metric | Value |
|---|---|
| Market Cap | $389.7B |
| Quality Rating | 6.3 |
| Intrinsic Value | $60.2 |
| 1Y Return | 16.5% |
| Revenue | $188.8B |
| Free Cash Flow | $35.6B |
| Revenue Growth | (1.9%) |
| FCF margin | 18.8% |
| Gross margin | 55.4% |
| ROIC | 16.7% |
| Total Debt to Equity | 120.7% |
Investment Thesis
Bank of America Corporation (BAC) holds a Quality rating of 6.3 with intrinsic value of $60.2 in a Market Cap of $389.7B. Metrics reveal Revenue of $188.8B, Free Cash Flow of $35.6B, slight Revenue growth decline of 1.9%, FCF margin of 18.8%, Gross margin of 55.4%, ROIC of 16.7%, but elevated Total Debt to Equity of 120.7%. 1Y Return of 16.5% reflects steady banking performance.
BAC offers analysis on financial stability in a high-interest environment.
Key Catalysts
- Reliable $35.6B Free Cash Flow
- Strong 55.4% Gross margin in lending
- 16.7% ROIC for capital efficiency
- Diversified revenue streams
Risk Factors
- High 120.7% Debt to Equity
- Negative 1.9% Revenue growth
- Interest rate sensitivity
- Economic recession impacts
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Stock #5: Netflix, Inc. (NFLX)
| Metric | Value |
|---|---|
| Market Cap | $352.4B |
| Quality Rating | 7.7 |
| Intrinsic Value | $91.8 |
| 1Y Return | -14.2% |
| Revenue | $45.2B |
| Free Cash Flow | $9,461.1M |
| Revenue Growth | 15.8% |
| FCF margin | 20.9% |
| Gross margin | 48.5% |
| ROIC | 33.5% |
| Total Debt to Equity | 54.3% |
Investment Thesis
Netflix, Inc. (NFLX) scores a Quality rating of 7.7 with intrinsic value of $91.8 at Market Cap $352.4B. It reports Revenue $45.2B, Free Cash Flow $9,461.1M, Revenue growth 15.8%, FCF margin 20.9%, Gross margin 48.5%, top ROIC 33.5%, and Total Debt to Equity 54.3%. Despite 1Y Return of -14.2%, growth persists in streaming.
NFLX analysis highlights content-driven scalability.
Key Catalysts
- High 33.5% ROIC from subscriber growth
- 15.8% Revenue growth in global markets
- Improving 20.9% FCF margin
- Password-sharing crackdown benefits
Risk Factors
- Negative -14.2% 1Y Return
- Intense competition from Disney+
- Content cost inflation
- 54.3% Debt to Equity
Stock #6: Toyota Motor Corporation (TM)
| Metric | Value |
|---|---|
| Market Cap | $295.1B |
| Quality Rating | 6.5 |
| Intrinsic Value | $565.1 |
| 1Y Return | 18.8% |
| Revenue | ¥49.4T |
| Free Cash Flow | ¥147.8B |
| Revenue Growth | 6.4% |
| FCF margin | 0.3% |
| Gross margin | 18.0% |
| ROIC | 8.8% |
| Total Debt to Equity | 103.7% |
Investment Thesis
Toyota Motor Corporation (TM) has a Quality rating 6.5 and intrinsic value $565.1 with Market Cap $295.1B. Key figures: Revenue ¥49.4T, Free Cash Flow ¥147.8B, Revenue growth 6.4%, low FCF margin 0.3%, Gross margin 18.0%, ROIC 8.8%, Total Debt to Equity 103.7%. 1Y Return 18.8% shows auto sector resilience.
TM provides insights into hybrid vehicle leadership.
Key Catalysts
- Steady 6.4% Revenue growth
- 18.8% 1Y Return amid EV shift
- Global brand strength
- Hybrid tech advantages
Risk Factors
- Thin 0.3% FCF margin
- High 103.7% Debt to Equity
- Auto industry cyclicality
- EV transition costs
Stock #7: Merck & Co., Inc. (MRK)
| Metric | Value |
|---|---|
| Market Cap | $273.2B |
| Quality Rating | 7.2 |
| Intrinsic Value | $116.1 |
| 1Y Return | 11.4% |
| Revenue | $64.2B |
| Free Cash Flow | $13.0B |
| Revenue Growth | 1.7% |
| FCF margin | 20.3% |
| Gross margin | 82.8% |
| ROIC | 30.1% |
| Total Debt to Equity | 79.8% |
Investment Thesis
Merck & Co., Inc. (MRK) boasts Quality rating 7.2, intrinsic value $116.1, Market Cap $273.2B. Data includes Revenue $64.2B, Free Cash Flow $13.0B, Revenue growth 1.7%, FCF margin 20.3%, exceptional Gross margin 82.8%, ROIC 30.1%, Total Debt to Equity 79.8%. 1Y Return 11.4% underscores pharma stability.
MRK analysis focuses on blockbuster drugs.
Key Catalysts
- Elite 82.8% Gross margin
- Strong 30.1% ROIC
- $13.0B Free Cash Flow
- Pipeline of oncology drugs
Risk Factors
- Slow 1.7% Revenue growth
- Patent cliffs ahead
- 79.8% Debt to Equity
- Regulatory hurdles
Stock #8: Novo Nordisk A/S (NVO)
| Metric | Value |
|---|---|
| Market Cap | $263.1B |
| Quality Rating | 6.2 |
| Intrinsic Value | $87.4 |
| 1Y Return | -30.4% |
| Revenue | DKK 315.6B |
| Free Cash Flow | DKK 62.7B |
| Revenue Growth | 16.6% |
| FCF margin | 19.9% |
| Gross margin | 82.0% |
| ROIC | 27.2% |
| Total Debt to Equity | 59.6% |
Investment Thesis
Novo Nordisk A/S (NVO) rates 6.2 in Quality, with intrinsic value $87.4 and Market Cap $263.1B. Metrics: Revenue DKK 315.6B, Free Cash Flow DKK 62.7B, Revenue growth 16.6%, FCF margin 19.9%, Gross margin 82.0%, ROIC 27.2%, Total Debt to Equity 59.6%. 1Y Return -30.4% suggests entry point in obesity drugs.
NVO offers healthcare growth analysis.
Key Catalysts
- Robust 16.6% Revenue growth
- High 82.0% Gross margin
- 27.2% ROIC in biotech
- GLP-1 drug demand
Risk Factors
- Sharp -30.4% 1Y Return
- Competition in weight loss
- Pricing pressures
- 59.6% Debt to Equity
Stock #9: Citigroup Inc. (C)
| Metric | Value |
|---|---|
| Market Cap | $209.7B |
| Quality Rating | 6.1 |
| Intrinsic Value | $134.1 |
| 1Y Return | 45.3% |
| Revenue | $168.3B |
| Free Cash Flow | ($97.5B) |
| Revenue Growth | (1.4%) |
| FCF margin | (57.9%) |
| Gross margin | 44.6% |
| ROIC | 33.1% |
| Total Debt to Equity | 334.8% |
Investment Thesis
Citigroup Inc. (C) scores Quality rating 6.1, intrinsic value $134.1, Market Cap $209.7B. Figures show Revenue $168.3B, negative Free Cash Flow $97.5B, Revenue growth 1.4%, FCF margin 57.9%, Gross margin 44.6%, high ROIC 33.1%, extreme Total Debt to Equity 334.8%. 1Y Return 45.3% indicates banking turnaround.
C provides financial sector educational content.
Key Catalysts
- Strong 45.3% 1Y Return
- 33.1% ROIC despite challenges
- Global banking network
- Restructuring benefits
Risk Factors
- Severe negative $97.5B FCF
- 334.8% Debt to Equity
- Regulatory fines history
- Negative 1.4% growth
Stock #10: Amgen Inc. (AMGN)
| Metric | Value |
|---|---|
| Market Cap | $183.4B |
| Quality Rating | 6.4 |
| Intrinsic Value | $449.9 |
| 1Y Return | 21.3% |
| Revenue | $36.0B |
| Free Cash Flow | $11.5B |
| Revenue Growth | 10.5% |
| FCF margin | 32.1% |
| Gross margin | 66.1% |
| ROIC | 12.0% |
| Total Debt to Equity | 567.5% |
Investment Thesis
Amgen Inc. (AMGN) has Quality rating 6.4, intrinsic value $449.9, Market Cap $183.4B. Includes Revenue $36.0B, Free Cash Flow $11.5B, Revenue growth 10.5%, FCF margin 32.1%, Gross margin 66.1%, ROIC 12.0%, very high Total Debt to Equity 567.5%. 1Y Return 21.3% reflects biotech strength.
AMGN analysis emphasizes drug innovation.
Key Catalysts
- Healthy 10.5% Revenue growth
- 32.1% FCF margin
- 21.3% 1Y Return
- Biosimilar expansion
Risk Factors
- Extreme 567.5% Debt to Equity
- Patent expirations
- R&D pipeline risks
- Biotech volatility
Portfolio Diversification Insights
This stock watchlist balances sectors: technology (TSM, MU, BABA, NFLX ~40%), financials (BAC, C ~20%), healthcare (MRK, NVO, AMGN ~25%), autos (TM ~10%), and consumer (NFLX cross). High-quality tech leaders like TSM and MU pair with value healthcare (MRK's margins complement NVO growth), while banks (BAC, C) add yield potential against cyclical autos (TM). Overall, ~60% growth tilt with defensive margins reduces correlation; e.g., TSM's ROIC offsets BABA's FCF issues, creating resilient sector allocation for undervalued stocks.
Market Timing & Entry Strategies
Consider positions during sector dips, such as tech pullbacks post-earnings or healthcare volatility from drug news. Use ValueSense intrinsic values for entry below 80% of fair value (e.g., TSM under $387). Dollar-cost average into high-conviction picks like MU amid cycles, monitoring ROIC trends and FCF recovery for banks. Track macroeconomic shifts like rates for financials, entering on 5-10% dips with stop-losses at 20% below intrinsic.
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FAQ Section
How were these stocks selected?
These stock picks were chosen using ValueSense's criteria: high intrinsic value upside, Quality ratings 6.0+, strong ROIC/margins, across tech, healthcare, financials for diversified investment opportunities.
What's the best stock from this list?
TSM and MU lead with 8.2 Quality ratings, top ROIC (38.2%, 23.4%), and growth (31.9%, 45.4% revenue), ideal for top stocks to buy now in semiconductors.
Should I buy all these stocks or diversify?
Diversify across sectors like tech (TSM/MU), healthcare (MRK/NVO), and financials (BAC/C) to balance risks, using this stock watchlist as educational allocation guide.
What are the biggest risks with these picks?
Key concerns include high debt (AMGN 567.5%, C 334.8%), negative FCF (BABA, C), geopolitical issues (TSM), and sector cycles (MU memory, TM autos).
When is the best time to invest in these stocks?
Target entries below intrinsic values during market dips, earnings reactions, or sector rotations, monitoring ValueSense metrics for undervalued stocks to buy.