Stocks began to rally late last week. If the gains continue, you're going to want to find the right investments to ride the market higher. There are a lot of stocks trading at surprisingly low valuations, making them prime candidates to lead the surge.
Crocs (CROX 1.47%), Camping World (CWH 2.79%), and Lovesac (LOVE 0.84%) are dirt cheap stocks. Let's see why they have enough growth catalysts to buy as the market rallies.
Image source: Getty Images.
1. Crocs
There's a lot of air flowing through Crocs these days, and I'm not talking about the all-weather shoes that are the Swiss cheese of the footwear industry. Shares of moved higher earlier this month after Crocs posted better-then-expected financial results. Revenue soared 57% to nearly $1 billion in the third quarter, ahead of the 47% to 52% it was targeting three months ago and the 51% increase analysts were targeting.
The acquisition of the faster-growing Heydude that closed in February is naturally padding the year-over-year comparisons, but organic growth for the Crocs brand still rose an impressive 14% (or 20% on a constant currency basis). Wall Street pros obviously factored in the acquired growth into their forecasts. Adjusted earnings per share of $2.97 blew past the $2.61 analysts were expecting.
More importantly, Crocs boosted its guidance for revenue and the low end of its profit outlook. Reported growth will slow when we lap the Heydude deal's close early next year, but you have to like Crocs' chances to stand out in a sea of ho-hum shoe stocks. Crocs has defied bearish knocks that its flagship shoes are a fad, and it's been succeeding for the past two decades. Now it has an even faster-growing footwear product line. Even after bouncing back this month, you can still buy Crocs for just 9.2 times the midpoint of this year's enhanced bottom-line guidance.
2. Camping World
If you're looking for a little investment income in your rally plays, you may want to hitch a ride onto Camping World. The leading retailer of recreational vehicles (RVs) is yielding 8.6%. As you can probably imagine, the payout is so high because Camping World is very profitable.
Interest in RVs has cooled since the early days of the COVID-19 crisis, when folks transferred their 2020 summer vacation money into down payments for motorhomes and towable travel trailers. It was the safe way to get around, but let's not dismiss the allure of the highway and the great outdoors. Hybrid workspaces are here to stay, and that will give folks more freedom to hop on their RVs and find connectivity to get work done.
Revenue declined 3% in Camping World's latest report, and adjusted earnings took an even bigger hit. Camping World is trading at a trailing earnings multiple of just 6.3. Analysts see it fetching 7.7 times next year's earnings, given the challenging climate for big-ticket items, but that can improve dramatically if the economy recovers quickly in 2023.
3. Lovesac
Folks can't get enough of Lovesac's wares. Its high-end beanbag chairs -- some large enough for an entire family -- and high-tech modular sectionals that can even house home theater speakers are hot. Sales shot higher in 2020 and 2021, when folks were spending more time at home. A lot of furniture and housewares specialists have faltered in 2022, but Lovesac's still sprinting.
Net sales soared 45% in Lovesac's latest quarter, well ahead of the 25% to 30% it was publicly calling for earlier. Net income and margins contracted on the same constraints weighing on other companies, but Lovesac has trounced Wall Street profit targets with ease consistently for more than a year.
We're now at 17 straight quarters where net sales rise at least 25% over the prior year's comparable report. It did warn at the time that growth is slowing, and it's eyeing just a 15% year-over-year increase for its upcoming report. It would be the end of a streak, but we've seen Lovesac be conservative with its crystal ball before.
You're getting Lovesac's growth at a great price. The stock is fetching 10.5 times this fiscal year's projected profit, but just 6.4 times next year's multiple. Like its namesake chairs, the stock is roomier than you may think.
