The market may be rallying, but not every stock is going along for the ride. There are plenty of quality stocks that are still trading a lot lower than they were a year ago.
They may not be at their best right now. You don't shed a third of your value in an otherwise buoyant past 12 months without some flaws. However, I think that Target (TGT 1.71%), Celsius Holdings (CELH +1.52%), and Freshpet (FRPT 1.74%) are three stocks that you might want to consider buying right now.
Yes, they are trading at least 33% lower over the past year (and a lot lower than their all-time highs). They still have some compelling reasons to emerge out of the market's penalty box. I am a shareholder in all three companies. Let's take a closer look.
NYSE: TGT
Key Data Points
1. Target: Down 33%
It's been a rough few quarters for Target. Shares of the "cheap chic" mass-market retailer have gotten even cheaper, but that's largely because the concept itself is no longer chic. Store comps have turned negative, and the chain is coming off back-to-back quarters of declining net sales.
The stock has shed a third of its value over the past year, pushing its yield to a beefy 4.6%. That payout could inch higher this week even if the shares stand still, because Target has boosted its dividend for 53 consecutive years. It has announced its hikes between June 9 and 15 in the past several years. If it's going to stretch its Dividend King streak to 54 years, it may very well happen later this week.
One can argue that Target has bigger things to worry about than to keep sending more money back to its shareholders. However, it has more than enough wiggle room to dig a little deeper into its pockets. It's currently paying out less than 50% of its trailing earnings in quarterly dividends. Guidance it provided last week calls for adjusted earnings per share between $7 and $9 this year, translating into a payout ratio between 50% and 64%.
Image source: Getty Images.
Target has some work to do to win its customers back. It's a retailer that not only managed to become political -- not typically the best move when you're literally a mass-market concept -- but also somehow angered both sides of the aisle.
Target upset some conservative customers a couple of years ago for some of the third-party merchandise it was selling through its online storefront. More recently, it upset some liberal shoppers in January by announcing an end to its DEI (Diversity, Equity, and Inclusion) initiatives.
Turnarounds take time, and with that chunky 4.6% yield, investors will be rewarded as they wait. As long as the turnaround isn't also going to cost Target a lot of money -- enough to bypass a dividend hike in the next few days -- it will succeed in keeping income investors close as it earns its growth investors back.
NASDAQ: CELH
Key Data Points
2. Celsius: Down 42%
Let's start this Celsius Holdings take with a seemingly contradictory snapshot. The functional sparkling beverage specialist is the hardest hit of the three stocks singled out here, with a bruising 42% slide over the past 365 days. It also happens to be one of this year's biggest market winners, up more than 60%.
Celsius has been scorching hot before. Revenue more than doubled every year from 2021 to 2023. Even after last year's hit, the stock is still a 12-bagger over the last five years.
However, seeing torrid growth morph into year-over-year declines in the last three quarters will do that to a humbled growth stock. Thankfully, help is on the way.
This year's effervescence can be tied to the acquisition of Alani Nu. More than half of the stock's jump this year happened the day that it announced an accretive deal to snap up the smaller but fast-growing maker of energy drinks. Alani targets a different niche than Celsius, but combined, they are actually gaining market share even over the past year. The deal closed at the start of April, so results -- even on a pro forma basis -- should turn positive starting with the current quarter.
NASDAQ: FRPT
Key Data Points
3. Freshpet: Down 39%
One of the more differentiated players in the pet food space is Freshpet. It has just a 3.5% slice of the country's dog food market, but it has a whopping 96% chunk of the fresh or frozen pet food market sold in brick-and-mortar retailers. Walk into a supermarket, convenience store, or -- callback alert -- Target, and you will find one or more of the 28,531 Freshpet-branded fridges exclusively selling its all-natural food for dogs and cats.
Convenient access across the country have made it a consistent growth stock, rattling off seven straight years of at least 27% top-line growth. The stock has taken a hit this year because that winning streak appears to be over. Freshpet started the year modeling 21% to 24% revenue growth, but it recently revised that lower. It now sees 15% to 18% growth this year.
Freshpet commanded a hefty premium to the market when it was a growth star. A widening audience and the high costs of switching out to inferior pet food will do that. Even after losing almost 40% of its value over the past year, the stock still isn't cheap. It's trading for 3 times sales and 37 times next year's earnings.
If it can get back on track, it would still be a historical buying opportunity. The right dog stock can be an investor's best friend.
