The market is ripe with excellent buying opportunities today, from quality stocks that have been unfairly beaten down to unstoppable players that have plenty of room to run. But two of my favorite types of stories right now are promising recoveries and young, undiscovered gems. Two perfect examples are Carnival (CCL -0.66%) (CUK -0.88%) and Chewy (CHWY 2.99%).
Carnival is the recovery story, making incredible progress after difficult times earlier in the pandemic. And Chewy, after reaching the milestone of its first profit in 2022, is expanding in smart areas that could increase this young company's growth over time. These and other points make them my two favorite stocks to buy right now. Let's take a closer look at each.
Image source: Getty Images.
Carnival
Carnival suffered earlier during the pandemic, as it was forced to halt sailings, and it built up a wall of debt during this time. But the world's biggest cruise operator has made a tremendous comeback over the past couple of years.
Demand for cruises returned, and at the same time, Carnival made efforts to cut fuel costs and generally become more efficient. For example, it replaced older ships with newer ones that aren't as energy-intensive and developed routes that require less fuel. As a result, Carnival has reported record revenues and bookings, and importantly, has generated adjusted free cash flow to help it pay down debt.
In the fiscal full year 2023, Carnival's revenue reached a record high of more than $21 billion, and the company entered the new year with its best booked position ever from both occupancy and price standpoints. Carnival also paid down debt, lowering the balance by $4.6 billion from its peak.
Of course, Carnival still has a significant amount of debt, with the peak having been around $35 billion, and that won't disappear overnight. But Carnival is progressively working on it, even paying down a significant amount of variable rate debt early last year -- making the company less sensitive to interest rate hikes.
All this makes Carnival a fantastic recovery story, and one trading at a reasonable price too. At close to its lowest ever in relation to sales, this cruise giant makes a top buy now.
CCL PS Ratio data by YCharts
Chewy
Chewy is an e-commerce company selling everything you need for your pet -- from food and toys to prescription drugs and pet insurance. The company even offers online chats with a vet for those with a Chewy account. Chewy became profitable in 2022, and sales continued to climb last year even at a time when rising inflation weighed on people's wallets.
What I like about Chewy is that sales have been driven by regular customers, which indicates shoppers keep coming back. We know this by looking at Autoship, a service that automatically reorders your favorite products and delivers them to your door. Autoship sales make up more than 76% of the company's total sales, offering us reason to be positive about ongoing growth.
Net sales per active customer have also been steadily on the rise, indicating that these customers are also spending more -- another good sign for future revenue.
Finally, Chewy is making two moves right now that could supercharge earnings over the long run. The company is expanding into Canada -- a country with market share and profitability potential similar to that of the U.S., according to Chewy. And in the U.S., Chewy is launching its own veterinary clinics. All this could represent a new wave of growth in the future.
Chewy's share price hasn't reflected all this good news. Instead, it has struggled to get off the ground. The stock has dropped more than 50% since its market debut in 2019. That has left Chewy trading for only 24 times forward earnings estimates, an absolute steal for a growth stock with so much potential.
All this means that now is an excellent moment to buy shares of this young e-commerce player -- and possibly benefit over the long haul as other investors discover it too.
