Best-in-class businesses tend to have stocks that trade at premium valuations, but occasionally investors can find instances where stock in those same top-notch companies is trading at attractive prices well below all-time highs. 

Spotify (SPOT 1.73%), Activision Blizzard (ATVI), and Nintendo (NTDOY -0.36%) are three companies that seem to fit that mold at the moment. Each one of these businesses appears to have promising prospects ahead, yet for one reason or another, their stock is trading at depressed prices.

A hand reaching for a video game controller.

Image source: Getty Images.

1. Spotify

Spotify, the world's largest audio streaming platform, has seen its stock price decline by more than 30% from recent highs following a broader tech sell-off and slower-than-expected user growth last quarter. 

In Spotify's early years, it was known exclusively for offering a comprehensive catalog of music, but lately, the company has invested heavily in alternative forms of audio -- primarily podcasting. 

While revenue from podcasting still makes up a relatively small amount of Spotify's overall top line, it's growing quite quickly. In fact, according to CFO Paul Vogel, podcasting revenue in the second quarter was "up close to 700% on an FX neutral basis." Though the financial details of the podcasting segment are lumped into the "ad-supported revenue" line item in the company's financial statements, management is beginning to spend more time focusing on that component. CEO Daniel Ek even stated on Spotify's latest quarterly conference call that "the days of our ad business accounting for less than 10% of our total revenue are behind us."

Over time, as podcasting becomes a more substantial part of the company's revenue mix, Spotify's profitability should see a positive boost because that segment has better margins than the company's core business. But even with the growth of podcasting in mind, Spotify currently trades at a price-to-sales multiple of just over 4 and a price-to-trailing-12-month gross profit multiple of roughly 17. For investors who aren't sure whether this is a cheap enough valuation, Spotify's management team made its views quite clear when it announced a new $1 billion share repurchase program.

2. Activision Blizzard

Activision Blizzard's stock performance lately has been hampered by controversy within the company. While it's difficult to know what potential repercussions may come from the recent lawsuits related to allegations of sexual harassment and discrimination against its female employees in its Blizzard division, it's also hard to ignore the overall growth that Activision is seeing among many of its prominent titles.

Two years ago, Activision Blizzard began focusing on expanding the potential user base of its famous Call of Duty franchise. By introducing a free-to-play mode and a mobile title to supplement its premium console and PC game versions, the company was able to increase its number of gamers threefold. This growth in gamers has also driven greater cash flow for the company. Over the last 12 months, Activision Blizzard generated roughly $2.5 billion in free cash flow, which represented a 43% increase from two years prior.

The company's management team stated that it wants to apply this model to a number of its other gaming franchises as well in order to bolster growth. By building various versions for different types of devices, Activision should be able to expand the audience for many of its legacy titles such as Diablo and World of Warcraft and replicate the revival that Call of Duty had. 

While I don't want to downplay the seriousness of the legal issues the company is dealing with -- they will likely leave a stain on its reputation -- Activision Blizzard's extensive library of intellectual property gives it a major advantage versus competitors over the long term. Instead of having to come up with entirely new game concepts, Activision can iterate on its time-tested brands with an existing user base to sell to.

Down more than 20% from its highs, Activision is valued at a price-to-free cash flow multiple of roughly 23. For investors willing to weather some turbulence in the near term, this looks like an opportune time to add shares of a proven long-term winner. 

3. Nintendo

Japanese gaming company Nintendo has been home to the best-selling console each of the last three years: the Nintendo Switch. While investors are often worried about the cyclicality involved in console production, Nintendo seems to have finally adapted its strategy. 

The Nintendo Switch has gone through several iterations since its initial launch in 2017, including a Lite version and an upgraded model released earlier this year. Additionally, Nintendo followed up the Switch launch with the introduction of Nintendo Switch Online, which allows users to be a member in exchange for monthly or yearly subscriptions. This online membership enables a much easier upgrade process from one console to another since users can maintain a single account with access to games from their various devices. According to the company's last update on the program, Nintendo Switch Online had 26 million subscribers (and that was roughly a year ago).

However, despite Nintendo's strong sales numbers, its stock is valued at a price-to-EBITDA multiple of roughly 8, which indicates that investors think the Switch platform will eventually fall out of favor. But this doesn't seem to be the case. According to NPD Group, the Switch console maintained its leadership position in the month of July by selling more units than either the Sony PlayStation 5 or Microsoft's Xbox Series X. 

As the number of households with Switch consoles continues to grow and digital game downloads rise as a percentage of total video game sales, producing new games should become more profitable for Nintendo. With timeless brands like Zelda, Mario, and Pokémon (through its ownership stake in The Pokémon Company), it's hard to imagine a future of gaming without Nintendo in it.