The S&P 500 is within 0.5% of its all-time high as of this writing after very strongly closing out the last three months of 2023. So finding stocks that just went on sale is a challenging task -- most everything is up recently. And finding quality on-sale businesses is harder still.
Yet I believe I did find three top stocks on sale as I sifted through a long list of tickers. Here's why Hormel (HRL +0.80%), Boot Barn (BOOT 1.50%), and Celsius Holdings (CELH +2.36%) could all be timely buys right now.
1. Hormel
Hormel stock is down almost 30% over the past year, with about half of the drop coming in just the last three months. Because of the drop, Hormel stock now trades at about 22 times its trailing earnings, which is its lowest valuation since 2019.
NYSE: HRL
Key Data Points
Wall Street appears concerned with Hormel's modest growth and potentially higher expenses -- it just signed a deal with union workers for an unprecedented pay increase.
However, fears may be overblown, because Hormel's long-term prospects still look solid. The company's revenue remains close to an all-time high. It expects that its operating income in its fiscal 2026 (which will end in October 2026) will be around $250 million higher than operating income in its fiscal 2022. Considering it had operating income of about $1.3 billion that year, that's meaningful growth for Hormel.
In 2021 Hormel acquired Planters, giving it broader distribution within convenience stores. This broader reach provides an opportunity for higher-margin growth as it expands its product offerings within existing locations, which is just one reason for optimism regarding its future profits.
As Hormel finds ways to increase profits, it should be able to sustain its fantastic dividend growth. The company has increased its dividend for 58 consecutive years, making it one of the most reliable dividend stocks on the market and worth buying at its present discounted price.
2. Boot Barn
The pullback for Boot Barn stock is mysterious. Yes, its same-store sales dropped recently and its full-year operating income is expected to decline year over year. But during the last six months, the business has performed largely as expected. Nevertheless, the stock price is down 26% from its 52-week high.
NYSE: BOOT
Key Data Points
Whatever the reason exactly, Boot Barn stock is down, and that's a long-term opportunity. The company's fiscal 2024 will end in March. For its fiscal 2024, management expects same-store sales to decline by 5% to 6.5% compared to its fiscal 2023. That's not what you want to see from a retail chain that's opening a lot of new stores.
Even with the drop in same-store sales, Boot Barn's nearly 400 locations are expected to earn a healthy profit. For the year, management expects operating income of about $200 million -- that's substantial for a company with a market capitalization of just $2.3 billion.
By 2030, Boot Barn hopes to have 900 locations. That will greatly increase the company's revenue. And if management can maintain its strong profit margins, then this company will have substantially higher earnings as well.
Trading at just 11 times this year's operating profits, Boot Barn stock will likely look like an absolute bargain in hindsight.
3. Celsius
Finally, energy drink company Celsius is on sale as well. Investors might not realize this considering shares are up more than 250% in just the last three years; however, from a price-to-sales valuation perspective, Celsius stock trades at about its cheapest level since 2020, landing it on this list with Hormel and Boot Barn.
NASDAQ: CELH
Key Data Points
Through the first three quarters of 2023, Celsius has grown revenue by 104% year over year to $971 million. Not only has growth been sensational, it's also been profitable. Year to date, Celsius has operating income of $207 million, which translates to a stellar operating margin of 21.4%.
It's crazy to think that Celsius hasn't remotely reached a ceiling to its growth potential. Even in the U.S., it has opportunities to expand. One example is within food service. Restaurant chains such as Dunkin' Donuts and Jersey Mike's now carry a limited number of Celsius products. Not only can the company sign up more restaurant partners, but it can also expand its lineup within its existing channels.
Moreover, more than 96% of Celsius' revenue comes from North America. International expansion is still a golden opportunity.
For investors who have watched the incredible rise of Celsius stock from the sidelines for the past three years, now is one of the most opportune moments for buying shares from a valuation perspective. The stock could always get cheaper. But with so much opportunity ahead, investors might not want to hold out too much longer hoping for a better price.
