The stock market has recovered quite a bit from the COVID-19 lows seen in March, but there are still plenty of high-quality stocks to be found in Wall Street's bargain bin. The three stocks below are leaders in their respective fields, with solid balance sheets and strong long-term growth opportunities. They are also trading at least 20% below their yearly highs.
Printed circuit board maker TTM Technologies (NASDAQ:TTMI) is trading 24% below January's 52-week highs, but the stock is beating the broader market from a full-year perspective. TTM is up by 17% over the last 12 months, while the S&P 500 gained just 5%.
Investors are worried about a lack of orders from networking equipment clients and car companies amid the COVID-19 crisis, which has reduced street-level demand for cars and slowed down network infrastructure upgrades.
The company remains profitable even during this global pandemic, however. TTM posted strong results across the board in the first quarter, and earnings are expected to stay positive in the next reporting period. Quick-turn circuit board orders are coming in strong from the medical, defense, and cellphone markets.
Furthermore, TTM is restructuring its operations in order to focus on more profitable target markets. Four mobility-oriented manufacturing plants in China were sold to a consortium of local investors in April, and the underperforming electro-mechanical business unit is winding down.
In short, TTM doesn't strike me as a company that should be trading at a serious discount compared to sector peers and its own historical averages, but that's exactly how the market is treating it. TTM is a solid long-term investment at these low prices.
Photomask manufacturer Photronics (NASDAQ:PLAB) is one of the most affordable stocks in the semiconductor sector. Shares are trading at just 5.7 times free cash flow and 13 times forward earnings estimates, having fallen 35% from December's multiyear highs.
Photronics recorded disappointing sales in last month's second-quarter report, but the top-line miss sprung from a number of delayed orders that should show up in the third or fourth quarters instead.
"Fortunately, we are already beginning to see our sales in these markets improve, and while there is uncertainty ahead, we are cautiously optimistic regarding the overall market outlook for the balance of the fiscal year," said CEO Peter Kirlin in the second-quarter earnings call. "Some of our customers pushed out orders, but those were related primarily to China and we are seeing improved bookings in April and May."
The company's products are a crucial part of the manufacturing processes for semiconductors and flat-panel displays. Photronics investors should really be champing at the bit as the organic light-emitting display (OLED) market evolves into a mainstream player, and semiconductor makers are hardly going out of fashion.
Photronics is profitable and its balance sheet carries more cash than debt. The upswing from the spring's coronavirus downturn has already started and the drastic share-price haircut looks like a big mistake.
The slide was accelerated by the COVID-19 crisis after advertisers started paring down their marketing efforts in an uncertain market environment. Management set up pessimistic next-quarter guidance targets, painting Q2 as the likely market bottom for digital advertising.
But the second quarter is actually working out better than expected, according to an update from Criteo. Meanwhile, the cost savings and share buyback programs that were set in motion by the coronavirus challenges remain in place and will help Criteo achieve stronger shareholder returns over the long haul.
And don't forget that Criteo is working around the technical user-tracking restrictions that started the stock's downward trajectory three years ago. The company is developing alternative tracking methods for browser-based ad campaigns and widening its business to include advertising campaign tools for mobile app platforms. Browser restrictions don't apply to that market at all.
If you're worried about short-term financial damage, you should know that Criteo has $440 million in cash equivalents and no long-term debt at all. All of the company's profit metrics are both stable and positive.
Criteo shares are trading 42% below its 52-week highs at a rock-bottom valuation of just nine times earnings, 3.7 times free cash flow, and 0.35 times trailing sales. This stock is priced for an absolute disaster, but Criteo's actual business looks solid to me.