3 Dirt Cheap Stocks That Make Terrific Buys Before the End of the Year
The stock market has climbed this year, but that doesn't mean the bargains are over. Many stocks missed out on the rally even though their long-term outlooks remain solid. And these are the stocks to add to your portfolio as soon as possible -- before they take off. It's impossible to say whether they'll climb right away or if it will take some time, but when a stock's price is reasonable and you're confident about the company's future, it's best to take action and get in on the story.
So, which stocks fall into this category right now? Shares of pharma giant Pfizer (NYSE: PFE), e-commerce pet supplies shop Chewy (NYSE: CHWY), and telemedicine leader Teladoc Health (NYSE: TDOC) have tumbled in the double digits this year, offering you an excellent entry point. Let's take a closer look at these dirt cheap stocks to buy before the end of the year.
Image source: Getty Images.
1. Pfizer
Pfizer grabbed investors' attention when it brought its blockbuster coronavirus vaccine to market. That product, along with Pfizer's coronavirus treatment, generated billions of dollars in earnings, and even helped the pharma giant report a record of more than $100 billion in revenue last year.
Many investors have since turned their backs on Pfizer -- they're worried about a decline in coronavirus product revenue and the upcoming losses of exclusivity that will impact some top-selling products outside of the coronavirus portfolio.
But here's why you should instead use the drop as a buying opportunity. Pfizer has prepared for this moment by developing new products to generate future revenue growth. The company is executing its biggest streak of product launches ever right now -- with the goal of releasing 19 new products or indications in 18 months. So far, it's completed 13 of those launches.
Pfizer also is gaining new potential revenue streams through acquisitions. New products and acquisitions are set to more than compensate for losses of exclusivity and drive long-term revenue growth.
All of this means, trading at only 18x times forward earnings estimates right now, Pfizer makes a terrific stock to buy and hold.
2. Chewy
Chewy reached a huge milestone last year when it became profitable. And, even through difficult economic times, it's managed to inspire its most loyal customers to increase the amount they spend on the platform -- in the double digits in the most recent quarters.
And it's these active customers who offer visibility on future earnings growth. Chewy offers a popular service called Autoship, which automatically reorders and sends your favorite products right to your door -- such as dog food, for example. And Autoship customer sales account for more than 76% of Chewy's net sales. Autoship sales advanced 13% in the most recent quarter, and new customers have steadily adopted this service.
So, this is a big chunk of revenue Chewy can pretty much count on, and that's good news for investors.
And now may be a particularly interesting moment to get in on Chewy because the company recently expanded into its first international market -- Canada. Chewy says customer demand and satisfaction has been high, a good sign as the company moves forward in this valuable new market.
Today, Chewy shares trade for 35x forward earnings estimates, down from more than 120 earlier this year -- and a steal for the company's progress so far and growth potential down the road.
3. Teladoc Health
Teladoc fell out of favor after its growth slowed in later stages of the pandemic and as it announced billions of dollars in noncash goodwill impairment charges linked to an acquisition. Some investors worried about the telemedicine leader's ability to reach profitability and so fled the shares.
But Teladoc took action, focusing on balancing revenue growth with efforts to reach profitability, and the plan has been bearing fruit. In the most recent quarter, Teladoc's results met or beat its expectations, and the company continued to make great strides in the key area of chronic care.
This is significant because about half of Americans have at least one chronic condition, so it's an important market to serve. In the most recent quarter, chronic care programs -- including more than 1.1 million active users -- drove revenue growth.
Teladoc also is launching an operational review that it hopes will drive share price growth. This will include a detailed look at the portfolio of products to ensure focus on Teladoc's "whole person care" strategy -- and a sharp review of the company's cost structure.
So, Teladoc's shares have what it takes to climb over the long run thanks to all of these efforts and progress today. At its cheapest ever in relation to sales, it's a top stock to bet on for the new year and beyond.
More From The Motley Fool
Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy, Pfizer, and Teladoc Health. The Motley Fool has a disclosure policy.
3 Dirt Cheap Stocks That Make Terrific Buys Before the End of the Year was originally published by The Motley Fool
