After posting its worst drop in 50 years in the first half of the year, the widely followed S&P 500 index has started to show signs of life. Since the beginning of July, the market benchmark is up 9.5%.
Even after the rally, there are great deals available. Wayfair (W -1.08%) stock has rebounded sharply off its 52-week low but still trades at a discount to peers in the retail industry. Meanwhile, Domino's Pizza (DPZ -0.95%) continues to invest in improving the customer experience, which could lead to more growth for investors.
Wayfair
Wayfair's stock performance lately might lead investors to believe this is a struggling business not worth buying, but those investors would be missing out on a potentially wealth-building investment. With more than 23,000 suppliers, 18,000 employees, 3,000 engineers, and 24 million active customers, Wayfair is well-positioned to take a significant share of the $800 billion home goods market.
The company was growing revenue around 40% per year before the pandemic. A rush to shop online in 2020 sent revenue up 55%, but Wayfair has had its share of struggles ever since. The company has been hit with a growth hangover as consumers return to brick-and-mortar shopping. It's also facing inflation challenges and supply-chain constraints.
Those problems caused revenue to fall 3% in 2021, and Wayfair just reported second-quarter results that showed another 15% decline in revenue.
However, the stock has already started to rebound off the recent lows, up 30% over the past month as investors anticipate the worst being over for the company. Yet, the stock is still a bargain, trading at a price-to-sales ratio of 0.60, which is slightly less than Walmart and a significant discount to Amazon.
Data by YCharts.
Wayfair will likely return to growth. It has a strong brand, and consumers will continue to shift more home goods spending online as they have with just about everything else.
In the near term, management is focused on guiding the business toward sustainable profitability while continuing to invest in faster delivery times and exclusive merchandise, as well as building brand awareness.
Wayfair is creating one of the strongest brands in e-commerce and now's the time to build a position before better news sends the shares higher.
Domino's Pizza
Shareholders have more than doubled their money in Domino's Pizza over the last five years, and investors could be in for another great return with the stock trading 31% off its highs.
Domino's is already everywhere, with 19,200 stores open globally. It may not seem like it has more room to expand, but the company creates value for shareholders by growing same-store sales and using share repurchases and cost discipline to boost earnings per share.
DPZ EPS Diluted (TTM) data by YCharts.
Nearly all of Domino's stores (98%, to be exact) are franchised, or non-company operated. This frees up capital for management to deploy to new stores and invest in new technologies that enhance the customer experience.
Innovation is something Domino's is known for with investors. It has partnered with large tech and social media companies to spread its brand ubiquity and give customers convenient ways to order using, for example, Meta Platforms' Facebook Messenger or Amazon's Echo devices. One of the more interesting innovations was the recent launch of the Mind Ordering app that Domino's released in partnership with Netflix ahead of the season four premiere of Stranger Things.
Domino's has been around for 60 years and is still producing market-beating returns for investors. The 30% drop in the share price this year is an excellent opportunity to buy this top restaurant stock at a discount.
