The stock market might be at an all-time high, but that doesn’t mean there aren’t bargains to be found. Many great companies have stocks that are on sale right now and ripe for the picking. This is especially true of share prices that are down despite companies posting strong financial results and either maintaining or raising their forward guidance. Despite strong results and a bullish outlook, some stocks are down because of macro-economic conditions beyond their control. But that’s what makes them great low-priced breakout stocks.
A pullback in consumer discretionary spending due to persistent inflation and high interest rates has been a running theme through first-quarter earnings season. This has led to selloffs in some truly outstanding companies. Stocks that have consistently beaten the market over the long-term are now down and their share price looks cheap. This presents an opportunity for shrewd investors to take advantage of before the stocks inevitably rise again.
Here are three currently low-priced stocks poised for a breakout.
Cava Group (CAVA)
Investors would be smart to buy the dip in Cava Group (NYSE:CAVA) after the Mediterranean restaurant chain reported blowout first-quarter financial results that crushed Wall Street forecasts. The company reported earnings per share (EPS) of 12 cents, which was more than double the 5 cents expected among analysts. Revenue totaled $256.3 million, ahead of expectations for $246 million. Sales were up 30% from a year ago. Cava opened 14 new restaurant locations during the quarter, bringing its national count to 323 outlets.
Despite the strong print, CAVA stock fell 5% after the company said that its same-store sales increased only 2.3% from a year ago as consumers spend less on dining out. In the previous quarter, Cava’s same-store sales grew 11% year-over-year (YOY). The pullback among consumers is likely to be temporary and doesn’t take away from the company’s long-term growth potential. Cava has now reported four consecutive quarters of profitability since going public in June 2023.
The company raised its forward guidance for the current year, saying it expects to add 50 to 54 new restaurant locations and see same-store sales growth between 4.5% and 6.5%. Cava is also forecasting full-year earnings of $100 million to $105 million. That’s an increase from an earlier forecast of $86 million to $92 million. Since going public nearly a year ago, CAVA stock has risen 143%.
Old Dominion Freight Line (ODFL)
There’s been a big selloff in shares of Old Dominion Freight Line (NASDAQ:ODFL) since the trucking and logistics company reported its Q1 results. ODFL stock is currently down 13% on the year and 24% below its 52-week high. Here, too, should investors see a buying opportunity. Like Cava Group, Old Dominion Freight Line’s print wasn’t that bad and the share price is not likely to be down for long.
The company managed to report a slight Q1 beat on the top and bottom lines. Old Dominion Freight Line announced EPS of $1.34, which was a little ahead of consensus estimates of $1.33. Revenues of $1.46 billion were just below the $1.47 billion forecast on Wall Street. While the results were by no means a blowout, management’s warning of a slowdown in shipments in coming months has hurt ODFL stock. Those concerns have been echoed by other U.S. trucking companies.
Any slowdown in shipments is likely to be cyclical and short-lived. As such, investors with a long time horizon would be wise to buy ODFL stock while its down. Long-term, Old Dominion Freight Line has been a consistent winner for its shareholders, having risen more than 750% in the last decade. With that kind of track record, investors would be wise to buy in now as ODFL is clearly one of the low-priced breakout stocks to watch.
Lowe’s (LOW)
Home improvement retailer Lowe’s (NYSE:LOW) is another traditionally strong stock that has been brought down by its recent financial results. So far in 2024, LOW stock has fallen 1.3% compared to an 11% gain in the benchmark S&P 500 index. Lowe’s share price is up only 5% over the past 12 months. As with the other names on this list, Lowe’s stock has been harmed by a predicted sales slowdown.
For Q1 of this year, Lowe’s announced financial results that topped Wall Street forecasts despite consumers pulling back their spending on do-it-yourself projects and large household appliances. The company reported EPS of $3.06 compared to $2.94 that was expected among analysts. Revenue for the January through March quarter came in at $21.36 billion versus $21.13 billion that had been forecast on Wall Street.
In its earnings release, Lowe’s said that sales to professional contractors helped to offset a decline in consumer spending during the first three months of the year. Management added that they expect a continued pullback in discretionary consumer spending over the near-term, sending the stock lower. However, Lowe’s maintained its full-year guidance and sees a reversal in consumer spending later in 2024. LOW stock is up 130% over the past five years.
On the date of publication, Joel Baglole did not hold (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.
