PET:CC - 2 Cyclical Retail Stocks You'll Want to Buy Before the Next Bull Market
2023-06-28 16:00:00 ET
There are retail stocks that are unquestionably non-essential, and then there are those that are only kind of non-essential. If you’re a parent or pet owner, you know what I mean. While we would hate to admit it, getting toys for your kids or your pet continues to be an essential even during these downturns.
Yet, of course, during these times when the market is down, and inflation and interest rates are high, we have to cut back. We just go elsewhere for cheaper products, but guaranteed, we’ll be back spending soon enough. Especially when a bull market hits.
Which is why today, I’m going to turn my attention to two retail stocks in particular that are overdue for a major boom in the near future. So let’s look at why Pet Valu Holdings ( TSX:PET ) and Spinmaster ( TSX:TOY ) belong on your watchlist today.
Spinmaster stock
Spinmaster stock had a huge boom during the pandemic. After all, parents needed to entertain their kids, and the best way to do that was through toys. Unless, of course, you planned on sitting them in front of a television for the next two years. Honestly, the company had plans for that as well, expanding its digital presence and creating Paw Patrol: The Movie to huge success.
Yet when restrictions faded, so too did the stock. Spinmaster stock is now down 17% in the last year, despite beating out earnings estimates over the last few quarters. While toy sales were down, as expected, the company’s expanding digital games operations continued to bring in more revenue. In fact, growth in this area led to over $30 million in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter.
It doesn’t look great for Spinmaster stock right now, with an operating loss at $6.1 million compared to income at $61.7 million the year before, and adjusted EBITDA a third of where it was last year. Yet, this could be the chance for investors to get in on a stock that’s due for a major turnaround.
With major brands such as Paw Patrol under its umbrella, more films in the future, and its expanding digital presence, Spinmaster stock is among the strong retail stocks to consider. It also trades at just 13 times earnings, which is far lower than its five-year average in the 20 price-to-earnings range. Therefore, a bull market could be just what this stock needs to rebound.
Pet Valu Holdings
Another pandemic stock to consider is Pet Valu stock, which again saw a surge as lockdown orders led to an increase in animal adoptions. All those animals needed stuff for their new homes, but since then there has been a decrease with the weakening market.
Shares of Pet Valu stock remain stable with where they were this time last year, but have dropped significantly since February. Shares are now down 29% since that time, as of writing, as the company missed earning estimates during its last quarter. Though this came after two very positive reports before that.
For now, the company is growing through other means. Pet Valu stock looks to open 50 new stores, even as profit comes in lower. These investments should come with more revenue from new store sales, as well as future profits from the return of a bull market.
The post 2 Cyclical Retail Stocks You’ll Want to Buy Before the Next Bull Market appeared first on The Motley Fool Canada .
Fool contributor Amy Legate-Wolfe has positions in Spin Master. The Motley Fool has positions in and recommends Spin Master. The Motley Fool recommends Pet Valu. The Motley Fool has a disclosure policy .
2023