Investor sentiment has beaten down more than its fair share of stocks over the last few years, even as the bull market has driven share prices of top companies across multiple industries skyward. Ultimately, when you're looking at stocks to invest in for the long-term, share price only tells you what the market values the company at in that given moment.
Share prices may be up or down for valid reasons, but it's important to look at the factors behind those movements and the underlying business behind the stock. This allows you to determine whether the business looks like a quality addition to your portfolio for the long term and whether it's trading at a price you're willing to pay.
On that note, if you are looking for two top stocks trading on sale right now, here are a couple of names trading quite near 52-week lows that you may want to consider for your portfolio.
1. CVS Health
CVS Health(NYSE: CVS) has been pummeled by the market lately, with shares not only hitting 52-week lows but also down approximately 30% from the start of 2024. There are numerous factors behind this decline. CVS has been dealing with decelerating growth recently, particularly because of higher-than-usual patient utilization rates for the company's Medicare business, which inevitably cuts into profits.
CVS has recently had to lower its financial guidance multiple times, another element that has led some investors to sell off shares. That said, the company continues to be profitable, is experiencing revenue growth, and has a strong cash position. In the second quarter of 2024, earnings were down year over year, but CVS still reported operating income of $3.1 billion and net income of $1.8 billion.
Revenue for the three-month period came to $91.2 billion, an increase of 2.3% from one year ago. The company also generated operating cash flow just shy of $8 billion in the first half of 2024.
Potential shareholders might be most interested in CVS for its dividend, which the company has an established track record of paying and raising in a wide range of environments. The stock has seen its payout rise about 33% in the trailing-five-year period alone, while the lackluster performance of shares lately has driven that yield to a juicy 4.6%. CVS currently boasts a payout ratio of approximately 45% of earnings, with a cash position of about $16 billion on hand at last count.
Healthcare costs have been on the upswing in recent years, and phenomena like a surge in Medicare Advantage enrollment can undoubtedly be traced back to delays in these trends due to the pandemic. While these are hurdles that CVS will need to overcome, it has the business to do so in the long run. The company remains one of the largest pharmacy benefit managers in the country, with a diversified business that includes its namesake pharmacy chain and a growing cohort of virtual care services.
CVS also owns Aetna, the third-largest health insurance company in the U.S. by market share. And while financial growth has slowed, CVS is still profitable and cash flow positive. The company's market leadership, its underlying business, and its dividend may all be reasons to consider a position in the healthcare stock.
2. Pinterest
Pinterest (NYSE: PINS) was a pandemic darling, but the growth stock has fallen considerably since that time. While shares are trading up by about 17% from one year ago, the stock is down about 12% from the start of 2024 and only about $8 above its 52-week low price.
Just because a stock is trading up or down doesn't mean you should buy in, but Pinterest's platform still has a lot of potential to deliver for both consumers and advertisers. The company makes money by selling ad space to companies across a range of industries, from beauty brands to home furnishing companies to clothing retailers.
Pinterest provides its users with free inspiration across a virtually endless array of topics through images and videos. Those images and videos are often ads that lead users to a specific product or service they can choose to buy. While consumer spending has been in flux since the pandemic surge, and advertising spending has contracted in the economic environment, the broader outlook for these markets remains favorable.
Looking at the second quarter of 2024, revenue rose by a healthy 21% year over year to $854 million. Pinterest now has 522 million monthly active users, up 12% from the same period last year. The company also generated global average revenue per user (ARPU) of $1.64 in the three-month period, up 8% on a year-over-year basis.
Pinterest's ARPU rose 16% in the U.S./Canada and 14% in Europe compared to one year ago. From a profitability perspective, the platform generated net income of $9 million in the second quarter of 2024, compared to a $35 million net loss one year ago. The company ended the period with about $1.4 billion in cash on hand.
Pinterest has had to deal with headwinds in its target markets from both consumers and advertisers, as well as the fact that growth has inevitably slowed from its pandemic peak. However, user growth is on the upswing again, revenue is growing steadily, and the company is working to be consistently profitable. Now could be an opportunity to buy this stock at a discounted valuation for its long-term potential.
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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pinterest. The Motley Fool recommends CVS Health. The Motley Fool has a disclosure policy.
