3 Value Stocks Near 52-Week Lows Worth Buying

While many companies are rising past their fair values, others are trading at potential bargain prices. Although many investors would rather have nothing to do with stocks wallowing at 52-week lows, it makes sense to see whether the market has overreacted to a company's bad news.

Here's a look at three fallen angels trading near their 52-week lows that could be worth buying.

Live long and prosper
On Star Trek, William Shatner always came out the victor. In recent months, however, the company he has represented for the past decade-and-a-half, Priceline Group (BKNG -0.45%), has dealt with its fair share of pessimists.

Source: Flickr user Dru Kelly.

Last week Priceline Group dipped below $1,000 per share for the first time since 2013 and has lost more than a quarter of its value since hitting a high of nearly $1,380 in March. The impetus? I suspect it has to do with three factors.

First, there's been minimal but regular insider selling that could have investors concerned about Priceline Group's future growth prospects. Secondly, weakness in Europe and a slowdown in China may have investors worried that international booking growth could slow. Lastly, with Priceline Group being one of the best-performing stocks of the past decade, some investors may simply be cashing in their chips with a four-digit share price on the ticker tape.

Although these are all viable reasons for the drop, I don't think they correctly factor into Priceline Group's superior long-term business strategy and market dynamics.

For starters, Priceline Group is well-diversified. The company currently gets about 80% of its revenue from the international markets, and it holds close to one-third of all international-booking market share. While the U.S. online travel service market is stocked with competition, most of that competition hasn't expanded beyond the borders of the U.S. yet. What this means for Priceline is superior growth prospects and the potential for better margins as its peers have to dig deep into their pocketbooks in an effort to catch up. Not to mention that international hotels in Europe appear to be more reliant on online travel agencies like Priceline Group to book rooms.

Further, Priceline Group's results speak wonders to its global diversity. International gross profit rose 33% in the third quarter to $2.3 billion, and gross travel bookings across the globe up 28% year-over-year to $13.8 billion. With a growing number of partnerships in place around the globe and Priceline Group looking to make earnings-accretive acquisitions related to customer service, such as its purchase of OpenTable in 2014, it's tough to see the company not succeeding.

Despite its four-digit price tag Priceline is valued at a mere 16 times forward earnings and could easily grow in excess of 15% per year over the next five years. It's a stock that could very well help shareholders live long and prosper.

Oh my Oshkosh
For the past year it's been rough sledding for Oshkosh (OSK 0.05%), a manufacturer of emergency vehicles, assault and tactical vehicles for the military, and commercial equipment like cement mixers and natural gas tankers.

Source: Oshkosh.

One somewhat obvious reason why we've seen Oshkosh struggle is the falling price of oil and natural gas. Lower natural gas prices could potentially reduce the need for natural gas tankers. Additionally, weaker oil prices reduce vehicle fuel costs and make it more justifiable to own a less fuel-efficient older vehicle. In other words, weaker oil prices could slow the replacement cycle that Oshkosh relies on to drive sales.

However, as I've said previously, I don't believe oil prices will stay this low for an extended period of time, which means what troubles may be caused by lower prices at the moment are unlikely to remain a factor for multiple quarters.

Looking at Oshkosh's business model, everything revolves around its MOVE strategy, which was introduced in 2012 to invigorate its growth. This includes exiting non-core businesses, optimizing its costs and capital structure, restructuring its workforce, adding valuable innovations to its already leading market segments, and further expanding into emerging markets. The result has been an increasing focus on its higher-growth non-defense segments. 

Source: Oshkosh.

In its fourth-quarter earnings report released in October, the company noted that consolidated sales fell 3.4% year-over-year, but that this was primarily due to an expected drop in defense orders. On the other hand, access equipment sales scorched higher by 19.5% year-over-year. Commercial segment sales also soared 16.4%. Despite a tougher defense spending environment, improved operating margins helped Oshkosh deliver $0.93 in EPS for Q4 compared to just $0.40 per share in Q4 2013.  

One last thing worth mentioning is that activist investor Carl Icahn made an unsolicited bid of around $3 billion for Oshkosh back in 2012. If Icahn saw value in the company, then I'd have to believe the possibility of a buyout could still be on the table with the company valued at a little more than $3 billion right now. 

Altogether, Oshkosh's successful MOVE initiative and its minuscule forward P/E of less than nine make this an attractively priced value stock. Throw in a 1.7% yield, and you have icing on the cake!

Home is where the profit is
Lastly, I'll step onto the path less traveled -- at least for me -- and suggest you take a look at the ninth-largest homebuilder in the U.S., Meritage Homes (MTH 0.23%).

Source: Meritage Homes.

Why has Meritage struggled for nearly a year now? A lot of it has to do with the expectation that the Federal Reserve will raise short-term lending rates in 2015. Low mortgage lending rates are critical to getting homeowners to make the leap from renting to home ownership, and even small moves higher in interest rates can cause a big downward move in housing-market demand.

Furthermore, Meritage shareholders were clearly worried by weaker quarterly results from rivals Lennar and KB Home, which saw their homebuilding margins decline on the heels of higher labor and materials costs and slower housing-price growth.

However, working in Meritage Homes' favor is the fact that it builds higher-end and luxury homes, so it's often attracting a far different clientele than Lennar and even KB Home. More affluent homebuyers will potentially be less turned off by minor fluctuations in the economy and interest rates. The result should be more stable demand and a less volatile backlog for Meritage over the long run.

Investors should also consider that the markets Meritage operates in are some of the most beaten-down areas from the housing bubble. States like California, Arizona, Nevada, and Florida saw home values lose as much as 50% or more since the housing bubble burst, but they also represent regions of the country where opportunity to snag a good deal on a house is still high. In short, I suspect Meritage can deliver double-digit growth in these previously beaten-down regions.

In Meritage Homes latest quarterly report nearly all of its important metrics went in the right direction. Home closed rose 7% year-over-year, home order value jumped 21% from Q3 2013, and the company's ending backlog through the first nine months of the year jumped 24% to 2,705. Meritage isn't struggling by any means.

With a forward P/E of just nine, this value stock could turn some heads and surprise investors in 2015.