5 Bargain Stocks To Buy Now

Stamps.com Growth Is Impressive

Despite what was undoubtedly a stellar fiscal 2020 for Stamps.com, its share price suffered a major downturn. Dropping 36% from February highs of $274 to a low of $170 in March this year, its current value has stabilized to around the $205 level. 

And even with the positive news of revenue growth of $758 million, which saw a 33% up-tick year-on-year, and a staggering rise of 108% on its GAAP EPS of $2.36, it didn’t prove enough for investors: a cautious approach to next year’s financial guidance by management in the aftermath of its annual report sounded enough uncertainty for shareholders to trigger a violent sell-off.

However, this reaction by the market is too hasty. Not only is the company growing revenues and profitability, it’s also increasing its base of paying customers, adding 266 thousand last year to bring its total up to 1.02 million for the quarter.

Stamps.com’s ambitious share buy-back scheme also shows that the management team is still confident in the businesses; and when management is confident, investors should be too.

Tupperware Bounces Back From Near Bankruptcy

It was little more than a year ago that Tupperware Brands was facing down the potential threat of bankruptcy.

With a share price low of just $1.87 during the great market decimation of March 2020, prospects for this household name of 74 years looked pretty bleak – its debt due to bonds was about $600 million, and these were due to mature in July 2021.

Fast forward to the present day, and the kitchen products retailer has pulled off an astonishing about-turn. Its stock value has surged nearly 15 times since its previous low, and the business is running on full steam.

Tupperware’s Free Cash Flow (FCF) for 2020 jumped to $197.6 million from the previous year’s $137.2 million, and it saw fourth quarter sales increase by 17%.

That strong FCF further means that the company’s debt is able to run at just 6x Trailing Twelve Month (TTM) cash flows rather than the 13x it was looking at last year.

Notably, the company was able to retire the Senior Notes due in July 2021, thus mitigating the overhanging prospect of bankruptcy.

So, what does the future hold for Tupperware Brands?

Well, with a revamped management team and a restructuring of the company itself, the firm is playing to its strengths. It has refinanced it debt position and is implementing a strategic growth plan based on the power and recognition of its decades-old brand.

The company has also embraced social media and digital platforms to reach new markets in the wake of the COVID pandemic, and leveraged the fact that more people are staying at home and cooking for themselves.

And this strategy seems to be working; sales revenue has grown an average of 20% over the last two quarters, and its Forward Price-to-Sales (P/S) ratio of 0.73 implies there’s still value to be had in this company.

Trupanion: Pet Insurance Has Grown 22% Annually

Trupanion is a pet insurance company primarily serving the North America market. The industry has seen a CAGR of 22% for the last five years, and Trupanion is well-positioned to take full advantage of these growth opportunities in what is still an under-penetrated market.

To begin with, Trupanion is already the market leader in its field, offering the broadest coverage and best value insurance product out there.

The company provides fully comprehensive, lifelong coverage for pets, allows owners to choose their preferred veterinarian, and has no payout limits. The firm also pays out vet fees at the time of checkout, covers 90% of veterinary costs, and has a 71% claims payout record.

The company’s financial history is almost unbelievable. For instance, Trupanion has seen revenues grow over the last 53 quarters more than 20% a time, with its latest Q4 results posting a year-on-year revenue growth of 35%. Its annual revenue for 2019 was $384 million – a year-on-year increase of 26%.

Moreover, the company enjoys several strong business moats: it has already established long-term relationships with a network of veterinarians; it has an attractive value proposition for pet owners which is unmatched by any other insurance provider; and it has a patented, direct invoicing technology that smooths payment processing between itself and its professional partners.

It also looks like Trupanion’s share price right now is grossly undervalued. The yearly high of $126.53 today sits at just $81.19, which coupled with a TTM P/S of 5.80, and a Forward P/S for December 2022 of 3.93, suggests a definite value opportunity.

DataDog Revenue Growth > 30% 

The enthusiasm for DataDog stock has waned recently, after its meteoric rise in 2020 took its share price from the $38 mark to just under $120 in a 52-week period. But, just because the market has lost interest, doesn’t mean you should too.

DataDog is essentially a Software-as-a-Service (SaaS) company providing monitoring services for cloud-scale applications.

In 2016, DataDog was one of the fastest growing enterprises in the world, and it was named as one of Forbes’ Cloud 100 companies.

Since then, the demand for DataDog’s services has grown, and the firm has consolidated its position in the wider market. However, its price action has been trending sideways for about nine months now, and it appears that investors are not sure what to make of it as a value proposition.

But this reticence is undeserved. While it’s true that Wall Street reacted negatively to what it perceived as a disappointing profit guidance, there was little real reason to have done so. Revenues grew 56% year-on-year to $178 million, and an EPS of $0.06 beat the consensus estimate by four cents.

The company has also been making several acquisitions recently, the latest being the security platform Sqreen – a bold move which will bolster DataDog’s functionality even more.

DataDog is a quality company that is worth paying a premium for. And SaaS is surely the future of business in a post-COVID environment. With revenue growth expected to be in the +30% range, this stock is certainly worth a second look.

CarGurus Gross Margins Are Astonishingly High

Not many businesses went unscathed in 2020, but the automobile industry was particularly hard-hit. And while the used-car segment enjoyed something of a resurgence – with travelers avoiding public transport due to health concerns around the coronavirus pandemic – car manufacturers posted an annual loss of around 15% in sales for the total year.

For companies such as CarGurus, which offer internet-based price-comparison and other consumer research tools for the automotive market, their fortunes have been tied to those of the brick-and-mortar dealerships that account for the main source of sales fees for these websites.

Even so, CarGurus didn’t have such a bad year. Indeed, consensus estimates are bullish, with The Street predicting a 24% year-on-year growth rate due to rebounding demand in the sector.

The company also managed to post exceptional gross margins during 2020 – upwards of 90% – and grew its FCF over the same time period too, almost tripling what it was the previous year. 

If CarGurus can meet those revenue expectations in 2021 and maintain its admirable profit margin, its current price of $25 looks to be a bargain.

---

The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.