Investors typically look back at the lows of past market crashes and think: "If only I could have bought stocks at those prices." While the market might not be at its bottom today, it is certainly possible that investors could be seeing historically cheap prices considering that the Nasdaq Composite index is down over 31% from its highs, and the Dow Jones Industrial Average is down 19%.
Whether the market is at its bottom or not, there are still absurdly cheap stocks available to investors today. MercadoLibre (MELI -1.01%) and Figs (FIGS 1.48%) are two that particularly stand out. The current valuations of these stocks might be once-in-a-lifetime opportunities, and you might not want to miss out on these unbelievably cheap prices.
Image source: Getty Images.
1. MercadoLibre
This Latin American e-commerce and fintech giant looks like a screaming bargain if there ever was one. The company has fallen alongside other fintech and e-commerce stocks, bringing its valuation down to just 4.9 times sales. MercadoLibre has reached a valuation this low only two times in its history as a public company (which dates back to 2007). Those times were earlier this year and in 2009. Additionally, its current valuation is multiples lower than its historical average price-to-sales (P/S) ratio of 11.5.
This valuation hasn't been because of poor performance. MercadoLibre had a stellar second quarter, highlighted by 56.5% year-over-year revenue growth to $2.6 billion on a foreign currency-neutral basis. The company's fintech platform, Mercado Pago, drove the charge. Pago posted 84% year-over-year total payment volume expansion in Q2, and the number of active fintech users increased by 26% versus the year-ago quarter.
This surprised investors expecting a slump in activity like most e-commerce platforms have seen. However, MercadoLibre operates in Latin American countries like Brazil, Argentina, and Mexico. Despite the challenging global economy, those countries continued adopting e-commerce at an astoundingly high rate. Retail e-commerce sales in these three countries jumped between 18% and 22% year over year in 2022 so far, compared to 16% growth over the same period in the U.S. This rapid wide-scale adoption likely helped MercadoLibre post better-than-average results.
Despite this high adoption, e-commerce prevalence in these Latin American countries is still relatively low at roughly 11% penetration. This leaves an enormous opportunity for MercadoLibre to be one of the primary beneficiaries of this emerging sector, along with other sectors like fintech.
Considering that MercadoLibre is one of the leaders in Latin American fintech and e-commerce, with more than 84 million consumers using at least one of its products, the company looks poised to capture the benefit of this emerging region. Even if you only have a few hundred dollars, it might be smart to scoop up a partial share of this company at this shockingly low valuation.
2. Figs
Figs also plummeted this year, falling nearly 66% year to date thanks to investor fears about rising inflation. Figs sells high-end scrubs for healthcare workers, so many investors believed the company would see demand fall off a cliff as consumer budgets tightened.
This drop brought Figs down to an absurdly low price. The company trades at just 4.7 times trailing gross profit, far lower than other apparel stocks like Nike or Lululemon Athletica, which both trade above seven times gross profit.
Not only is this company cheap, but its margin profile is astounding. Figs has maintained a gross margin above 70% -- far higher than most apparel stocks. For example, Lululemon, a company known for selling expensive clothes at a high margin, only has a 56.5% gross margin. This has fallen to the bottom line where Figs is achieving slight profits. Over the trailing 12 months, Figs generated $33 million in net income and almost $4 million in free cash flow. Considering the company primarily focuses on gaining market share and not profits at this point, any sign of profitability is impressive.
Figs has also seen continuously high consumer activity in 2022 despite the challenging macroeconomic picture. In Q2, sales rose about 21% year over year to $122 million, and active customers jumped 26% to 2 million.
If the company can continue strengthening its brand by creating high-quality products and keeping customers excited about its products, the future could be very bright for Figs. With its high-margin profile and easy path to profitability, investors could see fantastic benefits if they bought at these bargain prices and held for the long haul.
