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The S&P 500 has been steadily climbing back from the beating it took during the start of the year, but that doesn't mean every company has seen its stock recover equally. In fact, some great companies' stocks are still down big from their recent highs, which means investors who buy shares today could be in a prime position to bank a huge gain if their stocks come roaring back to life.
We asked our team of Motley Fool contributors to share a stock they feel has been unfairly beaten down and could be poised to roar higher. Read on to see which stocks they highlighted.
Brian Feroldi: Any company that pulls a portion of profits in overseas markets has had to deal with huge currency swings over the past year, which is something that can cause even great results to look muted. That's the situation today for The Priceline Group (NASDAQ: PCLN). The majority of PCLN's revenue and profits comes from its Booking.com brand, which holds a dominant position in Europe. Thus, the strength of the dollar has masked this company's true growth rate, and shares are down more than 11% from their November high.
However, if you strip out the currency effect, it's as clear as day that the company continues to grow at a blistering pace. In the most recent quarter, its revenue and gross profits soared by 22% and 29%, respectively, which shows that this company still knows how to grow despite its size. Importantly, PCLN's future continues to look bright, and it continues to add new properties to its platform at an astonishing rate. Priceline grew the number of listings on its Booking.com site by 38% in the most recent quarter to 820,000 properties, which represents more than 21 million bookable rooms. That's the largest collection of properties available anywhere, so expect consumers to continue to flock to the company's sites when they're looking to book a trip.
Priceline is set to report its earnings later this month, and it has a history of smashing expectations, so if can show once again that it's the top dog in travel, I could easily see its shares rebounding.
Selena Maranjian: One beaten-down stock that I expect will bounce back is Whole Foods Market, (NASDAQ: WFM). Shares have slid a whopping 45% over the past 12 months, enough to send many investors to the checkout. However, as we shall soon see, there are plenty of reasons to be hopeful about Whole Foods Market's future.
But first, why the price drop? Well, one reason is that many are worried about market share losses because conventional grocers are offering more organic fare. Fortunately, Whole Foods is fighting back in several promising ways. It's embracing technology in a big way, such as via its grocery delivery service Instacart. With customers ordering through apps, the initiative was recently enjoying a fast-growing revenue run rate of $130 million.
It's also launching a line of "365 by Whole Foods Market" stores targeting millennials -- with smaller footprints and lower prices. And it's aiming to boost the quality of its prepared foods, having hired a new chef. Indeed, co-CEO John Mackey has noted that Whole Foods' in-house cafes are "some of the highest volume restaurants in the country."
Whole Foods has a strong brand image, associated with high-quality offerings. It's working to strengthen that via its "Values Matter" campaign. Successful marketing can boost demand, while continual store openings can boost supply. Boasting fewer than 500 stores in the U.S., Canada, and the U.K., Whole Foods has lots of room to grow.
With amble annual free cash flow generation, net profit margins near 3.5% (roughly twice those of standout supermarket chain Kroger (KR +2.57%), and a forward-P/E ratio only near 21 according to S&P Capital IQ estimates, well below its five-year average of 33, Whole Foods' stock looks rather appealing.
Jordan Wathen: While 2016 has been a bad year for banks -- the Financial Select Sector SPDR ETF (XLF +0.18%) is down about 12% year to date -- banks that focus on energy banking are among the hardest hit. Cullen/Frost Bankers (CFR 0.06%) is one such bank, having fallen more than 21% to kick off the year.
Cullen/Frost is an otherwise well-run bank that's tied up in the oil patch. Energy loans made up roughly $1.76 billion, or about 15%, of its total loans and 6.6% of its total earning assets as of the fourth quarter 2015. It also disclosed that about 9.8% of its total energy loans were "problem credits," which are most likely to produce a loss.
But Cullen/Frost has survived oil downturns before. Importantly, it believes that its losses will be relatively light, building an allowance equal to 3.11% of its total energy loans at the end of the last quarter, based on a conservative outlook laid out on the company's most recent conference call.
As energy problems come to the surface, Cullen/Frost could offer a compelling opportunity to buy a great bank at a low price. After all, the bank has an exceptional deposit franchise, with 43% of its deposits being valuable non-interest-bearing deposits. Furthermore, about 57% of its earning assets are ultra-safe deposits and securities, which will help moderate the losses in its energy loan book. This is one bank to follow closely.
