In this article, we will take a look at the 10 Most Profitable Undervalued Stocks to Buy
Profitability has moved back into focus amid an environment where interest rates remain well above the levels seen for much of the past decade. With financing costs still elevated, markets have become more selective, placing greater emphasis on earnings quality and the ability of companies to generate returns from the capital they deploy.
This has been underscored by J.P. Morgan Asset Management; in their market insight entitled “Investors seeking resilience should consider a quality bias”, the firm has highlighted the importance of focusing on “companies that can translate investments into healthy profits, as reflected by metrics such as higher levels of return on equity (ROE).” In periods of tighter financial conditions, the firm has noted that profitability and a strong balance sheet tend to play a larger role in separating higher quality names.
J.P. Morgan Asset Management pointed to historical examples where periods of quality-stock underperformance can be followed by sharp reversals. The firm cited 2003 to 2008 as an example where higher-quality companies lagged broader developed markets for four consecutive years from 2003 to 2006, but as the cycle matured, “higher-quality fundamentals returned to the fore, with quality stocks outperforming by 7 percentage points in both 2007 and 2008.”
In view of this, we’ll look at highly profitable companies that remain undervalued.
Photo by Scott Graham on Unsplash
Our Methodology:
To arrive at the list of 10 Most Profitable Undervalued Stocks to Buy, we used the Finviz stock screener to compile a list of US Stocks with a market capitalization of at least $2 billion, a return on equity (ROE) of at least 15%, and trading at a forward price-to-earnings (PE) ratio below 15x. We then ranked the names based on the number of hedge funds holding the stock, using Insider Monkey’s hedge fund database.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10. American Financial Group, Inc. (NYSE:AFG)
Number of Hedge Fund Holders: 26
Forward PE: 10.66x
ROE: 16.91%
On February 4, 2026, American Financial Group, Inc. (NYSE:AFG) reported fourth-quarter revenue of $2.06 billion, comfortably ahead of the $1.83 billion consensus estimate. The quarter was also notable for underwriting performance, as underwriting profit rose 41% year over year and reached a new quarterly record.
Analyst sentiment turned more constructive earlier in the year. On January 15, 2026, Wells Fargo analyst Hristian Getsov initiated coverage of American Financial Group, Inc. (NYSE:AFG) with an Overweight rating and a $165 price target. The firm expects improved growth in 2026, in part due to favorable year-over-year comparisons. Wells Fargo also highlighted AFG’s relatively low exposure to property insurance, which it believes should help support margin stability in the coming year. The firm pointed to the company’s “superior” return on equity profile as a key differentiator within the insurance space.
American Financial Group, Inc. (NYSE:AFG) is an insurance holding company focused on specialty property and casualty insurance in the United States. Its operations span specialty transportation, marine, agricultural, and commercial property coverage, alongside excess and surplus lines, executive and professional liability, workers’ compensation, and specialty financial insurance products.
9. Globe Life Inc. (NYSE:GL)
Number of Hedge Fund Holders: 42
Forward PE: 8.93x
ROE: 22.28%
On February 6, 2026, JPMorgan analyst Jimmy Bhullar raised his price target on Globe Life Inc. (NYSE:GL) to $181 from $180 and reiterated an Overweight rating. The modest adjustment followed the company’s latest earnings update and the company’s fiscal 2026 earnings outlook.
A day earlier, on February 5, 2026, Globe Life Inc. (NYSE:GL) reported fourth-quarter revenue of $1.52 billion, slightly below the consensus estimate of $1.53 billion. While the top line came in slightly lower than consensus expectations, investor focus centered more on the company’s forward outlook. For fiscal year 2026, Globe Life Inc. (NYSE:GL) reportedly sees earnings of $14.95 to $15.65 per share, compared with a consensus estimate of $15.03. The range suggests management sees room for continued earnings growth.
Globe Life Inc. (NYSE:GL) provides life and supplemental health insurance products primarily to lower-middle- and middle-income households in the United States. Through its subsidiaries, the company operates across Life Insurance, Supplemental Health Insurance, and Investments, offering a mix of whole and term life policies alongside Medicare supplement and limited-benefit health products such as accident, cancer, and critical illness coverage.
