Since 2010, the S&P 500 index has experienced a decline of 10% or more on nine separate occasions, excluding the present market downturn. Remarkably, historical data indicates that following these corrections, the index has generated an impressive average return of 18% in the subsequent year. In fact, on eight out of the last nine occasions, the market was higher than when the corrections began, showcasing its resilience and recovery potential.
Considering these remarkable above-average returns, combined with numerous stocks currently trading at significantly reduced valuations, it presents an opportune moment for investors to consider adding to their stock portfolios. Below, I highlight three exceptional stocks that are trading at valuations not seen in a decade, making them attractive investment options right now.
1. Invest in Zoetis: A Leader in Animal Healthcare
Zoetis (ZTS 1.28%) stands out as a prominent player in the animal healthcare industry, providing over 300 products, including medicines, vaccines, and precision health solutions designed for both companion animals and livestock across the globe. The company’s extensive portfolio caters to the health needs of pets and farm animals alike, establishing Zoetis as a trusted name in animal wellness.
Since its separation from Pfizer in 2013, Zoetis has achieved an annualized total return of 15%, demonstrating its strong market performance despite appearing to be a stable investment initially. Recently, the stock has seen a decline of 39% due to a normalization phase following a pandemic-driven surge in pet adoptions and veterinarian visits, which has temporarily impacted its stock valuation.
Currently, Zoetis is trading at a price-to-earnings (P/E) ratio of 27, marking its lowest level in a decade. This significant decline presents a compelling buying opportunity for investors, as the market sentiment may not accurately reflect the strength of the company’s underlying operations and future prospects.
ZTS PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.
Despite current market pessimism surrounding Zoetis’s stock, the company’s actual performance indicators remain robust, with revenue and adjusted earnings per share growing by 11% and 17%, respectively, in 2024. A particularly exciting growth area for Zoetis includes its innovative treatments for osteoarthritis (OA) pain in dogs and cats. Their products, Librela (for dogs) and Solensia (for cats), have reported sales increases of 80% and 20%, respectively, in 2024 as veterinarians favor these options over traditional nonsteroidal anti-inflammatory drugs that often have undesirable side effects.
With 40% of dogs likely to experience OA pain during their lifetime and the life expectancy of cats and dogs increasing by two years since 2012, these breakthrough medications could significantly enhance the quality of life for our aging pets.
Additionally, there’s encouraging news for investors: Zoetis now boasts a dividend yield of 1.2%, its highest level ever, and management has consistently increased dividend payouts by 18% over the past decade. This combination of steady growth, promising new treatment areas, and a robust dividend at a decade-low valuation makes Zoetis a stock I am eager to continue accumulating in my investment portfolio.
2. Yeti: A Premium Outdoor Lifestyle Brand with Growth Potential
Yeti (YETI 3.42%) has emerged as a highly regarded lifestyle brand known for its top-notch outdoor products and drinkware. Renowned for their durability and quality, Yeti products have garnered a devoted following among outdoor enthusiasts, including surfers, fishermen, climbers, rodeo competitors, and barbecue aficionados. This loyalty has helped Yeti establish a strong market presence.
Since its initial public offering in 2019, Yeti’s stock price soared, increasing fivefold in just three years, positioning the company as a potential leader in the lifestyle segment. However, recent challenges, including a significant recall of certain cooler products in 2023 and ongoing tariff concerns related to China, have resulted in a staggering 75% drop from the stock’s all-time highs.
Despite this downturn, it’s important to note that Yeti has more than doubled its sales, net income, and free cash flow (FCF) since 2019, demonstrating its operational resilience. Although the road has been rocky, the company’s growth outlook remains bright as it focuses on two key strategies: marketing to adjacent consumer segments and expanding internationally.
Yeti’s efforts to diversify its product lineup include entering new categories such as cookware following its acquisition of Butter Pat. Furthermore, the brand is successfully collaborating with creators who align with its outdoor ethos and sponsoring teams in Major League Soccer and Formula 1, which broadens its audience reach significantly.
Currently, Yeti generates only 18% of its sales from international markets, a figure that falls short compared to many of its athletic brand competitors, which often see 40% to 50% of their sales from abroad. However, this percentage has increased significantly from just 2% in 2018, and Yeti’s impressive 30% growth in international sales during 2024 suggests that the best is yet to come for the company.
With Yeti trading at its lowest-ever P/E ratio of 13, there is potential for significant upside as the company transitions its drinkware production away from China. Investors should not perceive Yeti as a damaged brand due to recent tariffs; instead, it remains one of the most cherished brands in the market, bolstered by a substantial $300 million net cash balance to navigate future challenges.
3. Wingstop: A Promising Franchise with Strong Growth Prospects
Noteworthy in the fast-casual dining sector, Wingstop (WING 0.35%) has experienced rapid growth, operating 2,154 locations across the United States and 359 internationally. In 2024, Wingstop achieved its 21st consecutive year of same-store sales (SSS) growth, with significant increases in its store count, sales, and net income by 16%, 36%, and 55%, respectively. Despite this robust performance, the stock price currently sits 49% below its 52-week highs, presenting a curious situation for investors.
At first glance, this decline may seem perplexing; however, it becomes more understandable when we consider that Wingstop’s valuation soared to over 150 times earnings at one point last year. Essentially, the stock was priced for perfection but fell short in its latest results. Now, priced at 59 times earnings—well below its historical average of 100—Wingstop presents what I consider a once-in-a-decade investment opportunity.
WING PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.
I firmly believe Wingstop will grow into its current lofty valuation due to management’s ambitious plans to quadruple its store count over the long term, supported by a proven track record. While this objective may sound overly ambitious, the company has a robust pipeline of over 2,000 restaurant commitments under development, marking the highest figure in its history and nearly matching its existing store count.
This extensive pipeline, coupled with Wingstop’s long-standing history of same-store sales growth, positions the company to significantly outpace its current valuation metrics. For those concerned about Wingstop’s premium price point, it is worth noting that the company has historically averaged a P/E ratio of 100 and has proven to be a ten-bagger over its public trading history.
