The S&P 500 is still on a roll in 2025, up 27% over the past year. However, the market does look inflated. The average S&P 500 P/E ratio is almost 29, a 3-year high.

Can you still find bargains on the market? Yes. And some beaten-down stocks could turn around soon as the bull market keeps thriving and inflation moderates. Streaming company Roku (ROKU -3.15%) and cosmetics retailer Ulta Beauty (ULTA -0.59%) are two stocks with considerable long-term opportunity that are trailing the market's success.

1. Roku: 84% off all-time highs

Roku has been struggling to impress the market as it faces competition and finds profitability to be elusive. But it has a leading position in its category as the top streaming platform in the U.S., Canada, and Mexico, and it's entering more international markets.

It continues to demonstrate robust growth in both of its segments, devices and platform. The device business is sales of its streaming hardware, which makes streaming available on screens, with streaming-ready screens as well, and its platform business is mostly ad revenue on its free channels. The ad business is by far the bigger one, making up about 85% of the total in the 2024 third quarter, but the devices are growing, too, and they're the portal for viewers to get onto the platform. 

Ad business is starting to pick up again after some inflationary pullback, and as Roku adds more members households and viewing hours, it gets more ad revenue. In the third quarter, accounts increased 13% year over year to 85 million, and streaming hours were up 20%. That means new hours aren't just coming from new accounts, but existing members are engaging more on the platform.

It's making progress on profitability, too. The third quarter was the third-straight quarter of positive adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and free cash flow. It's still a ways off from net profitability, which isn't expected in 2025. But it's claiming the top spot in its category and identifying new opportunities in a growing industry, and scale is getting it closer to positive net income. 

2. Ulta: 26% off all-time highs

Ulta is a top beauty retailer, featuring cosmetics, skincare, and hair care products, as well as services in its 1,400+ stores. It has a huge assortment of products for every kind of budget, from luxury to mass brands, and its stock has been crushed as its core customers switch down to cheaper goods. 

It's still posting modest sales growth, with revenue up 1.7% in the 2024 fiscal third quarter (ended Nov. 2) and comparable sales up 0.6%. Transaction growth was higher than ticket growth, underscoring customer loyalty offset by buying less expensive merchandise.

This pattern is playing out more severely in Ulta's operating margin, which contracted from 13.1% to 12.6% in the quarter. That was a continuation of a negative trend that's been going on since high inflation started in 2022.

The market hasn't been happy with how this is playing out, but Ulta has an effective model and a massive long-term opportunity. As the leader in its category, it has an edge in the ability to meet shifting demand. Right now, it's identified wellness as an emerging trend, and it's incorporating that into its messaging and merchandizing. Since it already offers services, it can easily adapt to the increased demand for wellness in both product and service. And customers who come in for a service tend to also buy products, so it can achieve multiple goals with this framework.

It also already embraces the dominant growth models for beauty retailers today, specifically specialty beauty, the omnichannel strategy, and shop-in-shops, which it has in about 400 Target locations.

It's the natural platform for the beauty enthusiast to engage, and the beauty enthusiast accounts for the majority of sales in the industry. The group has doubled from about 70 million in 2021 to about 140 million in 2024. It has 44 million members and growing, and this group accounts for 95% of sales.

At the current price, Ulta stock trades at a forward 1-year P/E ratio of under 17, and this is an excellent opportunity to buy this top stock on the dip.