Bull market in 2024: Buy low on two merit stocks with declines of 40% and 60% respectively.

The stock market is off to a strong start in 2024, but the rebound is reflected to varying degrees in the share price movements of different companies.

Now, it's important to remember that stock prices alone don't tell us much beyond what investors seem to value a business at a given point in time. A falling share price may be due to poor business practices, but there may be something else going on. Similarly, a company with a rising stock price is not necessarily a good buy.

You want to understand why the stock price is moving, whether the company has a long-term competitive advantage, what its financial condition is, and to assess its overall growth. In addition, you want to invest in a business that you like, understand, and that makes sense for your investment portfolio and the goals you have set for yourself.

With that in mind, let's take a look at two stocks that have been seriously undervalued by the market lately, and which may make solid buying recommendations for savvy long-term investors.

1. Fiverr

Fiverr (NYSE: FVRR)'s stock is down about 40% from a year ago.Investors seem to be unhappy with the company's reported growth rate, especially as it relates to its pandemic-grade growth numbers, but there's more under the surface to dig into.

While it's true that Fiverr isn't growing as fast as it did during the pandemic, when interest in buying and selling temp services exploded relative to past periods, it's not necessarily realistic to expect that growth to continue indefinitely.

Meanwhile, the "casual labor economy" remains an increasingly important facet of the global labor economy and is expanding rapidly. It is estimated that by 2027, the global casual labor economy will be valued at about US$873 billion.

Fiverr also continues to experience steady revenue growth and has recently become profitable under Generally Accepted Accounting Principles (GAAP). Core factors driving revenue growth and profitability include increased deal acceptance rates, innovation from the Artificial Intelligence (AI) boom, and the increasing adoption of programs such as Promoted Gigs, where freelancers can pay to raise awareness of their services.

In 2023, Fiverr realized revenues of $361 million, a year-over-year increase of 71 TP3T. Keep in mind that the company's revenues in 2020 will be around $190 million, making the three-year increase 901 TP3T. Fiverr's net income in 2023 was $3.7 million, compared to a net loss of $72 million in 2022.

At the end of 2023, there were 4.1 million active buyers on Fiverr's platform, down 5% year-over-year. however, total gross spend per buyer at the end of the year was $278, an increase of 6% compared to the same period in 2022. by the end of 2023, Fiverr's close rate had also improved by 160 bps, to a full year close rate of 31.8%. in 2023, the company's AI investments drove the total value of goods on the platform (GMV) up by 4%. In 2023, the company's AI investments drove a 4% increase in gross merchandise value (GMV) on the platform.

Fiverr has launched a range of new AI-centric services, from skilled freelancers, who will create custom apps and chatbots for customers, to an AI matching tool to help buyers connect with freelancers. Koon also noted that compounding services accounted for 32% of GMV last year, up 29% from 2022.

This is not the story of a company in decline. The company's AI investments, rising order rates and improving profitability all bode well for the future. Now could be a good time to buy the stock on the downside, with a current price-to-sales ratio (P/S) of around 2.3.

2. Pretty Girl

Chewy (NYSE: CHWY)Shares of the company are down about 60% over the past 12 months, which appears to be due in large part to investor concerns about the pet care industry as a whole, and what pet spending will look like as the global economy continues to struggle.

It's true that pet ownership and pet spending spiked during the pandemic, but that doesn't mean the industry has gone downhill since then. While spending has slowed, and the rate at which individuals are buying new pets has slowed from pandemic levels, most people recognize that spending money on a furry friend is an important aspect of household spending.

While macro challenges persist, they offer a degree of flexibility for companies involved in this area. This is evidenced by Chewy's overall financial performance. In addition, as much as Chewy's share price might suggest, its financial position is healthy and, despite a slight decline in its active customer base, the company is still profitable.

Thanks to its autoship program, Chewy generates the majority of its revenue from recurring sources. in 2023, autoship sales accounted for $76% of Chewy's net sales total. as a result, one-time sales not only represent a smaller portion of Chewy's revenue, but they also indicate that once customers use its platform, they tend to stay with it. in 2023, net sales per active customer totaled $555, an increase of $12% from 2022. In 2023, net sales per active customer totaled $555, an increase of $12% from 2022.

Last year, Chewy generated 85% of net sales from non-discretionary pet spending, namely consumable products and healthcare. Total net sales for the year were $11.0 billion, an increase of 10%. Although net revenues were down from a year ago, the company was still profitable on a GAAP basis by approximately $40 million, with adjusted total net revenues of $296 million.

Chewy has proven to be a free cash flow machine as well. in 2023, the company's free cash flow almost tripled from the previous year, with last year's figure exceeding $340 million. If you're looking to buy a quality business on the downside, take a second look at this top pet stock.

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Rachel Warren does not hold any of the stocks mentioned above.The Motley Fool recommends Chewy and Fiverr International.The Motley Fool has a disclosure policy.

Bull Market 2024: Two Beaten Growth Stocks Down 40% and 60% to Buy Low was originally published by The Motley Fool.