3 Undervalued Stocks with Tremendous Upside Potential: ArcelorMittal, United States Cellular, and Telephone and Data Systems

While I believe growth stocks still have room to run, I think investors should also start to consider value stocks. For one, valuations on growth stocks are getting stretched, and two, value companies should begin to become more attractive as the economy rebounds. This will be especially true if the government passes the President's proposed massive stimulus program.

There are a few different measures I use to evaluate value stocks. The first is based on their valuation using the Price to Earnings (P/E) and Price to Sales ratios. Second, I like to look at their upside potential according to price targets based on Wall Street sell-side analysts' consensus. Wall Street analysts are responsible for covering a select group of stocks. Their coverage provides in-depth research on a company's current financial situation and prospects, which give the basis for their stock ratings and price targets.

A consensus price target is an average of target prices from analysts covering the stock. The upside potential is the percentage a stock could gain to meet its price target. So, I searched for stocks with low P/Es and Price to Sales ratios and found three with considerable upsides. That's why I am highlighting ArcelorMittal (MT), United States Cellular Corporation (USM), and Telephone and Data Systems (TDS) below.

ArcelorMittal (MT)

MT is the largest player in the global steel industry. Formed in 2006 via the merger of Arcelor and Mittal Steel, the two largest steelmakers, ArcelorMittal now produces more than 5% of the world's steel. It has a presence in more than 60 countries and operates a steel plant portfolio across both the developed and emerging world.

The company has focused on cost-reduction under its Action 2020 program, which includes optimizing costs and increasing steel shipment volumes. MT is expanding its steel-making capacity and is focused on shifting to high added value products, including increasing its automotive steel line of products.

It is also expanding its automotive steels portfolio by launching a new generation of advanced high strength steels. This launch is part of its Action 2020 program. These new products will ensure that the company is best positioned to handle customer requirements through a strong product portfolio.

MT currently has a forward P/E of 9.94 and a Price to Sales ratio of only 0.4. It also has an upside of 31.83% based on its current price. The stock is rated a "Buy" in our POWR Ratings system. It holds a grade of "A" in Trade Grade and a "B" for Buy & Hold Grade and Industry Rank. It is also the #8 ranked stock in the Steel industry.

United States Cellular Corporation (USM)

USM is a wireless telecommunications service provider and is the fourth-largest wireless carrier in the United States. It provides service to postpaid and prepaid customers from a variety of demographic segments. The company also offers smartphones, tablets, and other connected devices backed by its high-speed networks, including a fourth-generation (4G) Long-Term Evolution (LTE) network. The company is also a subsidiary of the next stock on this list, Telephone and Data Systems.

The company has been looking to accelerate subscriber additions and improve cancellations and is also well-positioned to support the deployment of 5G technology. USM's focus is on strengthening its customer base, identifying new revenue opportunities, and reducing expenses. The company is also working on building a more robust network for 5G.

To increase its penetration into the smartphone market, USM started shared data plans for consumers and businesses at minimal charges. It is also focused on expanding its solutions for business and government customers. In addition, equipment sales are expected to keep rising as the take rate for equipment installment plans increases.

The stock has a trailing P/E of 12.4 and a Price to Sales ratio of 0.7. It also has an upside potential of 18.62%, based on four analysts covering the stock. USM is rated a "Buy" in our POWR Ratings system. It holds a grade of "A" for Trade Grade and a "B" for Buy & Hold Grade and Industry Rank. It is also the #14 ranked stock in the Telecom-Domestic industry.

Telephone and Data Systems (TDS)

TDS is a diversified telecommunications operator that provides mobile, telephone, and broadband services to more than 7 million customers. The firm's mobile operations are conducted by its 81%-owned subsidiary, U.S. Cellular, which serves nearly 5 million wireless customers.

The company is seeing strong smartphone demand at USM, as previously mentioned above. In particular, the addition of the iPhone and other branded phones like the Samsung Note is primarily driving the company's revenues. TDS also saw strong growth in residential ARPU due to increased broadband penetration and video connections in the last quarter.

Its cable revenue came in at $74 million in the third quarter, up 19.4% year over year. This was driven by the acquisition of Continuum in North Carolina and growth in residential connections and broadband subscribers. The company is also planning to expand its service availability by increasing its fiber footprint.

TDS has a trailing P/E of 10.8 and a Price to Sales ratio of 0.5. According to the average analyst price target, the stock has an upside potential of 55.38%. The stock is rated a "Buy" in our POWR Ratings system. It holds a grade of "B" for Trade Grade and Industry Rank. It is also the #13 ranked stock in the Telecom - Domestic industry.

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MT shares . Year-to-date, MT has declined -3.97%, versus a 2.65% rise in the benchmark S&P 500 index during the same period.

David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a Consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.

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