Undervalued growth stocks are often overlooked by investors, they can offer significant potential for capital appreciation.

One way to identify undervalued growth stocks is to look for companies with high revenue and earnings growth, but low price-to-earnings (P/E) ratios. A low P/E ratio means that the stock is trading at a lower multiple of its earnings compared to other stocks in the same industry or market.

Another way to identify undervalued growth stocks is to look for companies with strong fundamentals such as high return on equity (ROE) and strong balance sheets. These companies are typically more financially stable and have a better chance of weathering market downturns.

UnitedHealth Group (UNH)

UnitedHealth Group (NYSE:UNH) might not initially appear to be an undervalued growth stock but it is. The healthcare giant provides health insurance, healthcare coverage and related software and consultancy services. In short, it’s more aligned with defensive stocks than growth stocks, at least at first blush. 

But dig a little deeper and you’ll see that UnitedHealth saw its fourth consecutive quarter of revenue growth to end the fiscal year 2022. The growth narrative behind the company is actually very apparent. 

UnitedHealth’s current return on equity is at a 10-year high of 26.94. This means UnitedHealth uses the equity shareholders provide to create a strong net income for the company.

UNH stock doesn’t boast a strong P/E ratio.  However, it does boast a healthy return on invested capital that exceeds its weighted average cost of capital by 3% over the last 12 months. That financial strength, combined with its dividend and 2022 top-line results, makes UNH stock undervalued indeed. 

BioNTech (BNTX) 

BioNTech (NASDAQ:BNTX) stock is significantly undervalued according to Wall Street. Analysts there believe it should trade for $211 yet it currently trades well below that. Other sites that rely on metrics-based comparisons, like Gurufocus, believe its value is actually more than 10X higher, at $2,037. 

BioNTech is essentially undergoing the hangover that comes from having successfully co-developed a Covid-19 vaccine with Pfizer (NYSE:PFE). It is now dealing with the resultant waning revenues as the pandemic fades. Analysts believe BioNTech will report around $17.95 billion in 2022 but a far smaller $10.09 billion in 2023.  

But BioNTech continues to ride its Covid-19 success and in December received FDA fast-track designation with Pfizer for their influenza/Covid-19 single-shot vaccine.

In the meantime, BioNTech has done what most successful pharma firms do. The firm has invested heavily in its pipeline after developing a blockbuster drug. Its P/E ratio is better than 92% of its peers so most investors are hesitant to pay for its earnings because they are expecting its Covid-19 vaccine to be a one-off success. 

United Microelectronics (UMC)

United Microelectronics (NYSE:UMC) stock represents Taiwan Semiconductor’s (NYSE:TSM) lesser-known compatriot and is an outstanding value currently.

The company is one of the largest foundries in the world. UMC provides a wide range of services including wafer fabrication, design, and packaging services. It primarily serves fabless semiconductor companies.

Important semiconductor firms are moving away from fabless partners and attempting to develop manufacturing on their own. That likely won’t be easy due to the technological know-how involved and the investment required, which implies fabless demand may spike again. That notion is reflected in growth projections for UMC moving forward. 

United Microelectronics is expected to record approximately $7.86 billion in revenues this year and $9.55 billion next year. So the growth narrative is there for UMC stock as an investment. 

Further, traditional value metrics favor UMC stock as an investment as well. Its P/E ratio of 7.33 is well below its 10-year median P/E ratio of 18.21(2). That P/E ratio spiked above 50 at one point in the last decade. That’s a clear indication that when the right mix of factors conspires, fabs like United Microelectronics get very hot. The company’s return on equity is currently very strong as well, further suggesting it to be a solid choice straddling growth and value. 

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.