3 Stocks That Are Ridiculously Cheap Right Now

By Markets Fool.com

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Everybody likes a good bargain. But with thousands of stocks to choose from, it can be hard to find the very best bargains the market has to offer.So we asked three Motley Fool contributors to each pick a stock they believe isridiculously cheapright now. Read on to see which companies they chose and why:

: When a company is assumed guilty by association with the weak performance of one of its peers, it can create excellent buying opportunities if that weakness isn't shared. I think one such opportunity is presenting itself right now in Michael Kors , shares of which fell hard last month when Fossil Group blamed today's "challenging retail environment" for causing it to badly miss expectations for both revenue and net income in its most recent quarter.

Last week, however, Michael Kors stock launched higher as it handily beat expectations with its own quarterly report. Revenue rose 11% year over year, to $1.2 billion, well above estimates calling for 6% growth. And net income per share rose 8.9%, to $0.98, or a penny per share higher than analysts were anticipating. Michael Kors CEO John Idol credited the company's elevated product offers and refreshed marketing campaigns, as well as the early fruits of strategic investments designed to foster long-term growth, including new stores, the expansion of Michael Kors' e-commerce business, and the build-out of its burgeoning men's segment.

But even after the recent pop, Michael Kors stock still trades at a mouth-watering 11.4 times trailing-12-month earnings and just 10.3 times next year's estimates. As its strategic initiatives continue to take hold, and if Michael Kors is able to keep executing on its opportunity for global growth, I think patient investors who buy the the stock now will be more than pleased with their long-term results.

Tim Green: Networking giant Cisco Systems is not an exciting company. About half of its revenue comes from selling switches and routers, with the rest derived from related businesses. Overall growth is slow, and theres not much reason to expect it to pick up anytime soon.

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But Cisco is dominant in its core markets, making its ridiculously cheap valuation absurd. At a price of about $29 per share and a market capitalization of roughly $147 billion, Cisco trades for 11.5 times its trailing-12-month free cash flow. While that multiple is already low, it ignores the tens of billions of dollars' worth of cash on the companys balance sheet. Whether to value that cash fully, given that much of it is held overseas, is a legitimate question. Best case scenario, Ciscos cash adjusted P/FCF ratio is as low as 8.8. Not much growth is needed to justify that multiple.

The biggest risk facing Cisco is the simple fact that the IT industry is in a state of rapid change. Cloud computing has shifted workloads from on-premises hardware to massive data centers run by tech giants like Alphabets Google. Both Google and Facebook have designed their own networking switches in the past few years, shunning proprietary products. Software-defined networking, where commodity hardware is paired with software, has been viewed as a major threat to Ciscos business model for years.

None of these developments have negatively affected Cisco so far. Fiscal 2015 was a record year in terms of revenue, and profit margins remain strong. Investors can use this undue pessimism to their advantage and buy Cisco at a discount.

Todd Campbell: Some companies are cheap because they're at risk of going out of business. For other, it's because investors are undervaluing their future opportunity. I believe Gilead Sciences falls into the latter camp.

Gilead Sciences' shares have fallen on hard times in the past year, but that's mainly because the company is a victim of its own success. Following the approval of game-changing drugs for hepatitis C, sales have tripled, and now that prescriptions for those drugs are leveling off, sales are plateauing.

Investors are looking elsewhere for growth now, but they could be back to picking up shares in Gilead Sciences soon enough. That's because Gilead Sciences' pipeline includes potential billion-dollar blockbusters under development to treat nonalcoholic steteohepatitis (NASH) and rheumatoid arthritis. The company has four different drugs in clinical trials for NASH and its launching phase 3 studies with co-developer Galapagos NV in rheumatoid arthritis soon.

Gilead Sciences could also see sales perk up because the Food and Drug Administration is set to make a decision on its latest combination hep C therapy later this month. If approved, this next-generation drug will be the first pan-genotype therapy to hit the market. Given that this drug delivers arguably best-in-class cure rates and safety, it's likely to be a big seller.

Overall, Gilead Sciences has more than $21 billion in cash available to fund research and development or mergers and acquisitions, and given that shares can be bought for less than seven times next year's estimated earnings, it's one of my favorite bargain-bin buys.

The article 3 Stocks That Are Ridiculously Cheap Right Now originally appeared on Fool.com.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fools board of directors. Steve Symington has no position in any stocks mentioned. Timothy Green owns shares of Cisco Systems. Todd Campbell owns shares of Gilead Sciences. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Facebook, and Gilead Sciences. The Motley Fool owns shares of Michael Kors Holdings. The Motley Fool recommends Cisco Systems and Fossil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.