After a disappointing 2022, the stock market has bounced back in 2023, with the S&P 500 up nearly 7% year to date. Not every stock has participated despite the recovery, and some have even fallen further.

Any time a stock drops significantly, it's worth digging in to to see whether a short-term catalyst or a long-term trend caused it. Long-term investors may be getting a quality stock at a temporary sale if it's the former. With that in mind, here are three stocks to buy at a massive discount. 

1. Cedar Fair

As with many so in-person entertainment companies, Cedar Fair (FUN) was hit hard the pandemic. The owner and operator of 11 regional amusement parks and four water parks saw admissions nosedive during 2020 and 2021 due to COVID-19. As a result of the disruption, Cedar Fair suspended its longtime dividend and its financials cratered.

Pre-pandemic, Cedar Fair's stock was around $55 per share. It currently trades for $41 per share. While the stock price hasn't sustained a full recovery yet, the company's key financial metrics have surpassed 2019 levels. Specifically, Cedar Fair generated $1.82 billion in revenue and $308 million in net income -- up 23% and 78%, respectively, from 2019. 

Due to the company's slow recovery and improved financials, the stock appears on sale, trading at a price-to-earnings (P/E) ratio of 7.5. For comparison, Cedar Fair's average P/E ratio over the past five years is 19.8. Plus, the company recently reinstated its dividend.

Going forward, Cedar Fair will need to pay down its outsized net debt of nearly $2.2 billion. If management can reduce its leverage over the next few years, patient investors will be thrilled with the stock's performance and be paid an annual dividend yield of 2.88% along the way.

2. Home Depot

Home Depot (HD 0.75%), the largest home improvement retailer in the U.S., has been an outstanding stock to own for the long term, producing a total return (including both the change in stock price and dividends) of 406% over the past decade. However, if you bought the stock at the beginning of 2023, you'd have a negative total return of 5.5%. 

The stock drop may not seem huge, but when you look at its financials, the shares are trading at a historically low valuation. Specifically, Home Depot currently has a P/E ratio of 17.3, well below its five-year average of 22 and near its brief 10-year low of 14.8 when the first pandemic shutdowns occurred in March 2020.

The stock has dropped due to relatively weak guidance. For Home Depot's fiscal 2022, the company broke sales and earnings records with $157.4 billion and net income of $16.69 per diluted share, respectively. Yet, for its fiscal 2023 year, management is guiding for "flat" sales and a "mid-single-digit percent" drop in diluted earnings per share. The company points to weakening consumer spending and raising its compensation for hourly workers' wages by a collective $1 billion.  

While management's uninspiring outlook for its fiscal 2023 has scared off some Home Depot investors, America's housing reality should give patient shareholders confidence. First, the majority of America's homes are at least 40 years old, according to the 2020 Census. Second, experts believe that America has underbuilt by more than 6.5 million household units since the Great Recession. So even if the American consumer is temporarily cash-strapped for a repair or house purchase, the long-term trends favor Home Depot stock to continue its outperformance.

3. Warby Parker

Once known as the online disruptor of the eyewear industry, Warby Parker (WRBY -4.06%) shifted to brick-and-mortar retail over the past few years in its attempt to become a one-stop shop for all corrective vision needs. The company went public via a direct listing in late 2021 at $40 per share, but has since fallen to $10 per share. 

For a growth stock, the market will react poorly when the all-important revenue metric stalls. That's precisely what happened to Warby Parker, which has yet to reach its high watermark of $153 million in quarterly revenue since first-quarter 2022.

There is hope for the beaten-down stock. Management guided for $645 million to $660 million in 2023, representing a year-over-year increase of 8% to 10%. To help reach this goal, the company plans to open 40 stores in 2023, bringing its store count up 20% to 240 total.

Person trying on a new pair of glasses.

Image source: Getty Images.

Warby Parker is a rare growth company that has zero debt.The stock is currently trading at five times its cash, with $208 million on its balance sheet and a market cap of $1.2 billion.  As it is an unprofitable company, management may have to take debt out to finance future expansion eventually. But in the meantime, it isn't spending millions of dollars on interest expenses like a typical company focused on growth.

Overall, Warby Parker may be growing more slowly than investors had hoped when it went public. However, management's disciplined approach to the company's balance sheet has left it well-positioned to bounce back in a high-interest-rate environment. If Warby Parker can meet its revenue goals and become profitable before taking on debt, investors should expect a sharp rebound.

Are these discounted stocks buys?

Beaten-down stocks are always worth a look, because who doesn't love a good sale? These three stocks are all down due to a combination of the pandemic, constraints on the consumer, and slower-than-expected growth. Still, all three have established themselves as leaders in their respective industries and would be sorely missed by their customers if they were to disappear tomorrow. That makes all three discounted stocks worth adding to your portfolio.