The stock market has become quite volatile lately as a variety of news headlines and expectations (or fears) drive prices in hard-to-predict swings. We are officially in a bear stock market, and this means there is already a lot of selling pressure. But this can be good news, since patient and prudent investing can discover opportunities and ignore the noise created by predictions on the state of the economy. they can find the best stocks to buy before they rebound.
The following seven stocks to buy now before they turn things around have several characteristics that make them attractive. These include attractive valuation, expected growth and current profitability.
What should you know about each one of these stocks now?
Let’s have a closer look at these stocks to buy before they rebound.
|CCRN||Cross Country Healthcare||$21.30|
|ETD||Ethan Allen Interiors||$21.10|
BlueLinx Holdings (BXC)
BlueLinx Holdings (NYSE:BXC) is one the largest U.S. building products distributors with products in categories like roofing, weatherization, lumber and flooring to name a few.
Shares of BlueLinx Holdings are down nearly 28% in 2022. They trade at a trailing price-earnings ratio of 1.8x and have a one-year target of $131.25 which is an upside potential of nearly 90%.
This stock is very cheap as it has a forward price/sales ratio of 0.15X and a trailing PEG GAAP of 0.01.
The revenue growth is solid, increasing for the past two consecutive years. In 20120 and 2021 the sales growth was 17.44% and 38.09% respectively.
The firm is profitable and has managed to increase its net income over two consecutive years putting net losses behind. In 2021 net income increased 266.13% to $296.13 million. In Q1 2022 BlueLinx Holdings reported a beat on EPS and on revenue.
The company has announced an increase to its share repurchase program from $75 million to $100 million, which is very bullish.
Veritiv (NYSE:VRTV) provides packing solutions, print and publishing products, and logistics and supply chain management solutions to companies. The firm serves a variety of industries.
The shares are down nearly 15% in 2022 and have had losses of about 32% in the past month. Why invest now in this stock that trades at a trailing P/E ratio of 8.25x?
It is a deep-value stock, as it has a trailing PEG GAAP of 0.03, a forward EV/sales of 0.36X, and a forward price/sales of 0.23X.
That is why analysts are bullish and have a one-year estimate target of $165, for an upside potential of nearly 58%. The company reported its latest quarter earnings that were a beat on EPS and on revenue. The EPS of $5.12 beat estimates by $1.39 and revenue of $1.86 billion beat by $86.7 million.
The company is profitable as of 2020 and profitability is getting better. In 2021 the net income grew 322.81% to $144.6 million, and the firm is doing fine in generating positive free cash flow.
Encore Wire (WIRE)
Encore Wire (NASDAQ:WIRE) manufactures and sells copper electrical building wires and cables used in both industrial buildings and homes. The stock has lost approximately 24% in 2022.
The stock trades at a trailing P/E ratio (TTM) of 3x which is very low.
If you look at the valuation metrics, you will find a lot to like in the trailing PEG GAAP of 0.01, the forward price/sales of 0.71X, and the forward EV/sales of 0.55X.
The one-year target is $178.50, which means potential upside of 85%. The sales growth has exploded to 103.04% or $2.59 billion in 2021 and the company has robust profitability.
It also generates a lot of positive free cash flow. In 2021 the free cash flow growth surged 1,146.88% to $299.62 million. Further dividend hikes are very likely, which is bullish for a rebound.
Builders FirstSource (BLDR)
Builders FirstSource (NYSE:BLDR) provides building products and equipment, and materials that are needed for construction such as doors, windows, stairs, lumber, drywall, and accessories. The firm has seen its shares lose nearly 32% year-to-date.
Now is the perfect time to invest at a discount in this high-quality company.
Remember at the beginning of this article, when I mentioned growth and profitability? Builders FirstSource has both of them. The revenue growth is robust, coming in at 17.56% in 2020 and 132.44% in 2021. What is great about the firm is that it turned these sales into great profits.
In 2020 net income growth was 41.35%, to $313.54, and in 2021 it was 450.31%, to $1.73 billion. The company also generates consistent positive free cash flows — in 2021 the free cash flow surged 924.2% to $1.52 billion. It is no wonder why the one-year target is $95.57 or an upside potential of 63%.
Cross Country Healthcare (CCRN)
Cross Country Healthcare (NASDAQ:CCRN) offers talent management and workforce solutions in the healthcare industry, helping healthcare professionals achieve professional and business goals.
The stock is down nearly 23% in 2022 and trades at a trailing P/E ratio of 4.5x. It is not a value trap stock, as it has reported growth in both sales and net income.
In 2021 sales increased 100.46%, to $1.68 billion. The net income in 2021 rose 1,118.38% as the company turned profitable and reported a net income of $132 million.
The stock has been a laggard, the stock price not reflecting the inflection point of profitability. The analysts give a one-year target of $34.33 which is an upside potential of 61%.
In its last quarterly earnings report, the company beat expectations on both EPS and revenue, which is supportive of a rebound.
D.R. Horton (DHI)
D.R. Horton (NYSE:DHI) is a homebuilding company that not only builds homes but it also provides mortgages and insurance services.
The U.S home market is a barometer of the health of the U.S .economy and the stock has surprisingly fallen nearly 33% in 2022. The same pattern seen with the previous stocks in this list repeats for DHI stock. There was a strong Q2 FY2022 quarter with a beat on both EPS and on revenue.
The company has beat EPS in all past four consecutive quarters, which is both bullish and shows strong momentum in profitability. The sales growth is exceptional and in 2021 it increased 36.74% to $27.77 billion.
At the same time, the net income is exceptional. In 2021, net income soared 75.92% to $4.18 billion. The firm generates positive but volatile free cash flow. Can the stock move to its one-year target of $95.32, delivering potential profits of 32%? It could do so, as the valuation and fundamentals are strong.
The forward price/sales ratio of 0.71x is cheap. A rebound is likely for this home builder.
Ethan Allen Interiors (ETD)
Ethan Allen Interiors (NYSE:ETD) is a furniture manufacturer with products for homes and home offices. The stock is down nearly 20% in 2022.
The valuation is very attractive, as the stock trades at a forward price/sales ratio of 0.66x and has a trailing PEG GAAP of 0.03.
The sales growth is not bad, as after the decline of 21.01% in 2020 it increased by 16.16% in 2021. The firm is profitable too, and although its net income is volatile, this is not something negative, especially as in 2021 the firm reported net income growth of 574.21% to $60.01 million.
In Q3 2022 the firm delivered strong earnings. The EPS GAAP of 97 cents beat expectations by 20 cents and revenue of $197.66 million was a beat by $559,000.
The analysts give a one-year target of $26 or an upside potential of 23%.
On the date of publication, Stavros Georgiadis, CFA did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.