The Nasdaq Composite has hit choppy waters this year. Dropping by nearly 26%, it's firmly in bear market territory. While no one likes to see their stocks fall in value, this is also an opportunity to buy shares at an attractive valuation.
However, you still need to do your homework to see which companies have attractive growth valuations. Fortunately, these two pass muster.
Apple's (AAPL -1.35%) popular offerings include the iPhone, iPad, and Mac. Its lineup has drawn a large following through sleek designs, high functionality, and excellent service.
The stock has taken a rare breather this year, falling by about 13%, partly due to the overall market downturn. Additionally, Apple's fiscal third-quarter sales grew by just 1.9% to $83 billion. The period ended on June 25.
Fortunately, better days seem set to resume shortly. A key growth driver, the iPhone, had sales of $40.7 billion, a 2.7% increase compared to a year ago. While this seems sluggish, it has outperformed other smartphone makers. Better still, Apple seems set to launch the latest version very soon. It's worth noting that the last two generations were a tremendous success.
Apple's price-to-earnings ratio (P/E) has dropped to about 26 times, down from 30 at the start of the year. At the lower valuation, this seems an opportune time to pick up shares ahead of an expected sales growth acceleration.
Costco Wholesale (COST 0.17%) sells just about everything you can think of in its warehouses. And it sells its high-quality goods and services at attractive unit prices. The company's value proposition does well in a variety of economic environments. Its stock price has fallen by 9% this year, but that has more to do with the general market sentiment.
To shop at Costco, you need to pay an annual fee. Given its roughly 90% renewal rates and consistently growing memberships, people find it worthwhile. In the third fiscal quarter (ended May 8), the company had 64.4 million paid members, up from 61.7 million at the end of fiscal 2021 (ended Aug. 29, 2021).
It's not merely growing members, either. Costco continues to generate higher operating income, despite higher costs affecting many other retailers. Last quarter, its operating income was $1.8 billion, 7.7% higher than a year ago.
Management continues to steadily expand the number of warehouses. The company previously stated that it expected to have 840 warehouses at the end of the latest fiscal year, up from the 817 it had a year ago.
Costco sells at a P/E of 41, down from nearly 50 at the start of 2022. Although that's double the S&P 500's multiple, Costco should sell for a higher valuation since it has a steadily growing business that attracts members in a variety of economic circumstances.
It's not easy to buy stocks when they're dropping. Apple and Costco shares may drop further should the Nasdaq Composite continue falling. But their long-term prospects remain strong, making this an opportune time to purchase shares in these two companies.