Not every stock is rallying these days. Many stocks have corrected sharply from their earlier peaks. They may have seemed cheap then. They are a lot cheaper now.
Camping World (CWH -3.53%), Sleep Number (SNBR -2.38%), and Huya (HUYA -1.29%) are three ridiculously cheap stocks. Will you regret not buying them on the dip? Let's take a closer look to see if you wind up agreeing with me.
1. Camping World
Shares of Camping World hit another three-year low on Thursday. The leading retailer of recreational vehicles has seen its stock cut nearly in half since its summertime peak, down almost two-thirds from its all-time peak set in early 2021 when the country was gravitating to RVs.
The pandemic sparked a boom in sales. When demand outstripped supply, Camping World revved even harder with higher mark-ups on its used RV inventory. Revenue soared 27% in 2021, record-high growth in the retailer's publicly traded history. It's a different operating climate these days. Revenue growth has been negative for four consecutive quarters, clocking in at a record decline of 12% in its latest report.
Image source: Getty Images.
Selling pricey RVs is challenging given the high financing rates and iffy economy. Rising oil prices in recent months are also going to dissuade potential buyers from springing for a house on wheels with an 80-gallon gas tank. The bottom line is taking an even bigger hit. Camping World slashed its buoyant but unsustainable dividend.
Let's shift from the gloom and doom to the vroom and vroom. Analysts see Camping World resuming its top-line growth next year with earnings more than tripling from this year's depressed showing. Camping World is trading for just 8 times next year's projected adjusted earnings. The stock's current 2.9% yield will be able to widen again.
There's always the risk that the near future doesn't put the pedal to the metal. Camping World has fallen short of Wall Street profit targets in three of the past four quarters, and RV stocks aren't going to shift out of reverse if the country drives into a recession next year. I still like the undisputed top dog in an industry with a bright long-term outlook given the graying America and the growing popularity of working remotely.
2. Sleep Number
Another stock that has been roughly cut in half since mid-July is Sleep Number. To be fair, shares of the bedding specialist had also inexplicably more than doubled since the end of May until that point.
The air was let out of the high-tech air-chambered mattress maker after it posted disappointing financial results in late July. The top line fell well short of expectations, and Sleep Number would go on to hose down its revenue and earnings guidance. Business was already lumpy heading into the financial update. Revenue has declined in five of the last seven quarters, a stark contrast to a company that had delivered a dozen consecutive fiscal years of top-line growth before a supply chain shortage followed by a slump in demand ended that run two years ago.
Sleep Number sees a return to growth next year. The stock is selling for just 9 times next year's profit target. It has a differentiated product in a market of cookie-cutter mattress solutions. It's hoping to raise the bar yet again with rollouts in the coming months. The catalysts are there for restless investors that have gone from counting sheep to counting cheap.
3. Huya
Let's travel to China for the last name on this list. Huya is the country's leading streaming platform for gamer videos, essentially Twitch in the world's most populous nation. The stock has surrendered nearly a quarter of its value, but it's down nearly 75% since going public five years ago.
Revenue growth has decelerated every year since its market debut, and it's clocking in with negative growth for the second year in a row. Following the same turnaround script as Camping World and Sleep Number, Huya is expected to resume top-line growth next year. However, the value in this case isn't a single-digit forward earnings multiple.
Huya is just starting to become profitable, so a P/E ratio is as high as the stock is low. You'll find the real bargain here on the balance sheet instead of the income statement. Huya has a net cash position north of $1.2 billion, but it packs a market cap of just $730 million. It has a negative enterprise value of $512 million as of Thursday's close. The stock is trading for less than its liquidation value.
It's fair to say that investing in Chinese stocks is riskier than ever right now. Huya also faces obstacles given the country's historical desire to curb online gaming. User and premium subscriber growth have been inching in the wrong direction. Huya's balance sheet discipline gives it time to get things right. It's a play for video game fans comfortable with playing a long game with their investments.
