For long-term investors with capital to deploy in the current market, it's still a great time to put money to work in wonderful stocks with robust underlying businesses. While stocks across most sectors have declined over the past year, it's vital that investors not confuse share price fluctuations with the potential of an underlying business.

Some stocks might be trading down for valid reasons. But others, like Upstart (UPST 0.82%) and Pinterest (PINS 0.34%), could be undervalued by investors and still hold tremendous potential over the next 5 to 10 years or longer. As always, a look beyond the share price of a company and a close evaluation of the underlying business are keys before you buy or sell a stock. 

With that said, here's a closer look at the viability of Upstart and Pinterest. Each of these stocks are trading on sale, but still have explosive growth potential in the years ahead.

1. Upstart 

It's understandable that some investors have shied away from Upstart in the current market. The company's business is predicated upon extending personal, small-business, and auto loans. And in an elevated interest-rate environment, potentially teetering on the brink of a recession, the risk of default is much higher. Fewer consumers in general are going to apply for loans due to the high interest rates these loans entail.

These factors aren't going to shift in the immediate future, which investors should take into account before they take a position in Upstart. But over the long term, I think it can still be a winner. After all, the company is building upon the competitive advantage of its proprietary underwriting model and continues to expand its network of lending partners. 

Upstart is actively working to revolutionize the way that consumers can access credit, by looking beyond Fair Isaac's (NYSE: FICO) FICO score models alone, and taking into account nontraditional factors like education that can form a more complete picture of an applicant's creditworthiness.

Not only does Upstart's model approve the same amount of loans as large U.S. banks, with 75% fewer defaults, it also generates 173% more approvals than these institutions, with the same loss rate. And in the most recent quarter, 75% of its loans were approved on a fully automated basis. 

Upstart's proprietary model, which is driven by artificial intelligence and machine learning, is designed to adjust to the types of challenges induced by the current economy. As management noted in the most recent quarter, "Model accuracy improved as much in [the] last four months as [the] prior two years."

This means that while Upstart reported fewer approvals with higher interest rates assessed to approved applicants, which drove down its top and bottom lines, its model continues to work as designed. This tendency to recalibrate is innate to the company's lending model, and bodes well for its future once the current situation improves. 

Upstart also continues to grow its network of lending partners even as approvals are down and fewer consumers are applying for loans. For example, it finished the third quarter of this year with 83 credit union and bank partners compared to 31 in the year-ago period. Meanwhile, its network of auto dealer partners skyrocketed from 291 in the year-ago quarter to 702 in the third quarter.  

Some analysts on Wall Street still estimate that Upstart could achieve a high upside of 42% over the next year. Looking beyond what happens in the coming months, a long-term position could pay off in the years ahead for investors with the risk appetite to handle this type of stock. 

2. Pinterest 

Pinterest is another company that has been significantly beaten down over the last year as broad sentiment has turned against growth-oriented stocks that benefited during the pandemic lockdowns. Part of Pinterest's downfall is also tied to specific business-related factors. For example, its decline in monthly active users over recent quarters has made some investors run for the hills.

Other concerns have stemmed from uncertainty about Pinterest's prospects as advertisers pull back on spending amid fears of a potential recession. But while the platform grew incredibly fast in the earlier days of the pandemic, it was unreasonable to expect that rapid growth to continue indefinitely. 

Even as user growth has pulled back, its average revenue per user (ARPU) has continued to grow steadily. And its most recent quarterly report could be signaling the start of a turnaround that investors have been waiting for.

In the third quarter, not only did its revenue jump 8% year over year to $685 million, but total ARPU also increased 11%. Monthly active users totaled 445 million at the end of the three-month period, compared to 444 million in the prior-year period. The company also reported adjusted earnings of $77 million for the quarter, although it has not yet returned to profitability based on generally accepted accounting principles (GAAP).  

The trajectory of ad spend could be curtailed in the near term if a recession does hit. And few businesses can have a strong online presence without compelling advertising campaigns. However, Pinterest's particular mode of online advertising uses promoted and shoppable pins in the forms of images or videos to market products and services. This design continues to provide ample incentive for brands to target the millions of consumers who continue to leverage the vast social commerce platform.

Currently, some Wall Street analysts estimate that Pinterest could realize a high potential upside of 72% over the next year. Combine this estimate with the possibility of continued success on its platform despite a general slowdown in advertising, and this could be a compelling signal for long-term investors to take a second look at Pinterest.