Global markets are wrestling with mixed signals on inflation, growth, and interest rates, which can make it hard to know where to focus. One approach is to look past headlines and concentrate on companies whose cash flows appear solid yet whose share prices sit below an estimate of fair value. That is what the Undervalued Stocks Based On Cash Flows screener targets, using SWS DCF valuation to flag potential mismatches between price and underlying cash generation. In this article, you will see three stocks filtered by this screener, along with clear, practical analysis of each opportunity.

Bloom Energy (BE)

Overview: Bloom Energy is a US-based power technology company that builds solid oxide fuel cell systems, using fuels like natural gas, biogas and hydrogen to provide on-site electricity for data centers, utilities, hospitals, manufacturers and other large power users. It also sells electrolyzers to produce hydrogen.

Operations: Bloom Energy generates all of its approximately US$2.4b in revenue from electric equipment, with around US$2.1b coming from the United States and the rest from other countries.

Market Cap: US$74.0b

Bloom Energy is attracting attention because it sits at the crossroads of AI data center growth and cleaner, on-site power, with large Oracle and Nebius deals pointing to sizeable, long-term projects and a Q1 revenue jump of about 130% year on year. Expectations for stronger earnings and revenue, plus a Simply Wall St DCF suggesting the share price sits below the estimated value of future cash flows, highlight why some investors see room for upside if the company delivers on its backlog and partnerships. At the same time, thin current margins, high reliance on external funding and exposure to natural gas, regulation and project execution risks mean the path is far from straightforward, which is where deeper analysis becomes crucial.

Bloom Energy’s AI fueled projects and discounted cash flow story appear to be two sides of the same coin, and the real tension sits inside the 3 key rewards and 4 important warning signs

Lumentum Holdings (LITE)

Overview: Lumentum Holdings is a US-based photonics company that supplies the lasers, optical chips, and related components that move data inside cloud and AI data centers, telecom networks, and advanced manufacturing lines. Its products also power industrial uses such as semiconductor, solar, display, and electric vehicle and battery production.

Operations: Lumentum generates revenue across the globe, with material sales in the United States (about US$523.1m), Thailand (US$494.4m), Hong Kong (US$460.7m), Mexico (US$318.0m), Europe, the Middle East and Africa (US$178.7m), Japan (US$96.2m) and other Asia-Pacific and Americas markets.

Market Cap: US$71.7b

Lumentum Holdings sits at the heart of the AI buildout, supplying critical optics to hyperscale cloud and AI/ML infrastructure while recently returning to profitability and showing strong margin recovery. Forecasts for rapid earnings and revenue growth, rising ROE and its addition to major indices have drawn attention, even as the stock trades well below one estimate of fair value and analysts highlight ambitious price targets. At the same time, a high P/S multiple, heavy reliance on external funding, insider selling and exposure to cyclical hyperscaler spending and rare earth supply risks mean investors are paying up for an aggressive growth story. What really stands out is how these powerful drivers and meaningful risks intersect within Lumentum’s AI optics engine and capital structure, which the screener’s cash flow focus helps bring into sharper relief.

Lumentum’s AI optics engine, margin recovery and index inclusion point to a story where expectations and price are still out of sync, so review the 3 key rewards and 2 important warning signs investors may be missing a crucial twist in that gap

Nu Holdings (NU)

Overview: Nu Holdings is a São Paulo based digital bank that offers app first accounts, cards, loans, investing, crypto and insurance, aiming to replace traditional branch banking for more than 100 million customers across Brazil, Mexico and Colombia. Its model focuses on low fees, simple mobile products and turning a large user base into a broad financial services ecosystem.

Operations: Nu Holdings generates about US$7.6b in revenue primarily from banking services, with most revenue coming from Brazil alongside smaller contributions from Mexico and other countries.

Market Cap: US$59.3b

Nu Holdings stands out because it combines very high profitability metrics, such as a 25.3% ROE and a 41.9% net margin, with rapid customer growth and a fully digital cost base in markets where many people are still underbanked. At the same time, investors need to weigh a high bad loans ratio of 7.9%, insider selling, a relatively new management team and fresh regulatory pressure as Brazil moves Nu toward a full banking license. The stock also carries a rich P/E multiple but trades below at least one cash flow based value estimate. This makes the balance between strong fundamentals and rising execution and credit risks the key question to understand.

Nu Holdings’ high ROE, wide net margin and digital scale suggest the story is still being underestimated. Review the analyst forecasts for Nu Holdings to see how credit risk and regulation could shift the picture.

The three stocks in this article are just a starting point. The full SWS DCF screen uncovered 703 more companies where current prices and cash flow potential tell equally compelling stories, all grouped in the Undervalued Stocks Based On Cash Flows screener. Use Simply Wall St to identify, filter and analyze the specific catalysts and narratives that matter to you so you can focus on the highest conviction ideas in minutes instead of hours.

Take Control of Your Investment Journey

If Nu Holdings or any of these companies have caught your attention, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value and track any new developments as they happen. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

Seeking Fresh Alternatives Before They Fly?

New ideas do not stay under the radar for long. Spot potential breakouts while they still have room to run, before momentum gets fully caught, and act now.

• Chase resilient income streams with pricing power by scanning a curated 9 dividend fortresses that could help keep your portfolio paying even when growth stories are dropping.
• Hunt for compounding potential in a hand picked 20 high quality undiscovered gems before the crowd notices and re-rates companies that still trade like they are off the grid.
• Zero in on sturdier balance sheets using a focused list of solid balance sheet and fundamentals (48 results) so you can stay in the game when weaker stocks are falling out of favor.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.