Stock Market Plunge: 3 Unstoppable Stocks to Buy Now

With all major equity indices posting double-digit losses year to date, investors have had a tough year. But sooner or later, this bear market will turn into a new bull market. While some stocks still look expensive based on traditional valuation metrics, there are plenty of solid companies on sale right now.

Three Motley Fool collaborators recently selected a company that can offer even better returns than the market average. That’s why they chose eBay (EBAY -1.47%), Texas Roadhouse (TXRH -1.78%)And Wheel (RVLV -2.97%).

An inexpensive action and an asset-light business model

Parkev Tatevosian (eBay): With stock markets plummeting and the US economy likely in recession, it pays to own companies that can do well in that environment. It’s one of the reasons eBay is one of my favorite titles to buy now. The e-commerce and auction site is known for rock bottom prices on used and new goods. Also, since the company uses an asset-light business model, it’s not that heavily impacted by rising inflation.

eBay does not own any of the inventories sold on its platform. Instead, it brings buyers and sellers together and encourages them to transact. It does this by processing payments, offering buyers and sellers fraud protection, and supporting the technology that makes it all possible. What’s noteworthy is what the company doesn’t do – it leaves the shipping and handling to buyers and sellers to sort out with each other, bypassing expensive service.

eBay is not a fast growing stock; revenue has remained relatively stable over the past decade. But earnings per share grew at a compound annual rate of 23.6% during that period.

Furthermore, if the economy were to enter a prolonged recession, consumers could look more often at eBay’s low-priced second-hand goods. They might also try to sell more items used to generate money. Each would be a desirable outcome.

EBAY PS report chart

EBAY PS Ratio data from YCharts.

Fortunately, the stock market crash caused eBay stock to sell at a relatively cheap valuation. With a price-to-sale ratio of 2.7, eBay is probably as cheap as it has been for the past five years.

Consistency and quality of service in the catering sector

John Ballard (Texas Roadhouse): Finding a successful restaurant early in its growth cycle can be one of the simplest and most rewarding ways to generate above-market returns.

Texas Roadhouse looks very promising. The stock has produced a 15% annualized return to investors over the past 10 years, but its focus on consistency, quality service and a performance-based management culture should keep the growth streak going for many years.

This steakhouse chain was founded in 1993 and has grown to 680 restaurants in 49 states, including a growing presence in 10 foreign countries. The company originated in Clarksville, Indiana, but now operates restaurants around the world in places like Saudi Arabia and Taiwan. This says a lot about how well this concept fits across cultural boundaries.

Despite the 40-year high inflation that is causing a rise in raw material costs for the restaurant industry, consumers continue to eat out. Texas Roadhouse expects to experience positive comparable sales growth for the full year. It saw an 18% year-over-year revenue increase in the first half of the year, with comp sales up 8% in the second quarter.

Restaurant growth shares are attractively priced with a forward price-to-earnings ratio of 23. For a company that offers a consistent return on investment in mid-teens, this is a good price to open a position.

A thriving fashion stock with huge potential

Jennifer Saibil (Revolve Group): Revolve Group is an AI-powered fashion retailer that has done what many fashion retailers have been unable to do in recent years: demonstrate significant growth. Sales increased 54% year-over-year in 2021 and the company continued to deliver strong results in 2022, up 27% in the second quarter. Active customers, average order value and total orders placed continue to increase.

Revolve Group is also profitable, although it suffers from the pressure of inflation. Net income was $ 16.3 million in the second quarter, a 48% decline from last year.

Management hasn’t had an exciting update for the rest of the year. He said July sales were up 10% from last year, a huge slowdown from what has been fantastic growth. Not surprisingly, investors don’t like to hear that growth is stalling, even if it may be temporary. So it’s also not surprising that Revolve Group’s shares fell 57% this year.

But I think the slowdown is very likely to be temporary. There are several reasons to imagine Revolve Group returning to an extraordinary future. In particular, he speaks the language of his market.

Revolve Group is in touch with the way millennials think and shop and offers this central market what it is looking for. It offers a large and constantly updated collection of designer clothing, shoes, accessories and beauty products and markets these products through a vast network of celebrities, influencers and other social media personalities and bloggers. Everything it does is powered by artificial intelligence and machine learning, making it easy for the Revolve Group to know what’s interesting and what’s not.

Since it is entirely online, it can easily add and delete products. This helps him sell more products at full price instead of being forced to put items up for sale at the end of a season. In 2021, 87% of items were sold at full price. That percentage is likely to be lower in 2022, but the Revolve Group model is a proven winner.

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