A Bull Market Is Here: Don't Miss These 2 Undervalued Stocks

In the midst of a roaring bull market, driven by tech giants and mega-cap stocks, investors may overlook the potential of undervalued consumer goods and services companies. While the S&P 500 and Nasdaq Composite have surged by 26% and 28% respectively in 2024, two big-name stocks, Domino's Pizza (DPZ) and Carnival (CCL), have lagged behind, presenting attractive opportunities for investors.

Domino's Pizza, a beloved pizza chain, has seen its stock price soar by 16% year-to-date, but it still trails the broader market's gains. The company's fundamentals remain strong, with a gross margin of 39.3% and a net income margin of 12.7% across the first three quarters of 2024. Despite these impressive figures, Domino's stock is still down roughly 15% from its 2021 peak, offering an appealing risk-reward profile.



Domino's Pizza's long-term growth prospects are underappreciated, as the company stands to benefit significantly from advancements in artificial intelligence (AI) and robotics. As a leader in the restaurant and food delivery industry, Domino's is well-positioned to leverage these technologies to increase operational efficiency, reduce labor costs, and enhance the customer experience. Moreover, Domino's has proven itself to be a reliable dividend growth stock, with a payout that has increased by 132% over the last five years and 504% over the last decade.

Carnival, the world's leading cruise operator, has faced a challenging journey since the onset of the pandemic. However, the company has since rebounded, with revenue and net income increasing by 14% and 61% year-over-year, respectively, in the 2024 fiscal third quarter. Carnival's strong performance is driven by soaring demand, with loyal cruise enthusiasts and new customers booking record numbers of cruises at high ticket prices. Despite these encouraging signs, Carnival's stock has plummeted by 65% from its peak in 2019, primarily due to its high debt burden.



Carnival's debt-to-equity ratio stands at 1.9, significantly higher than industry peers like Royal Caribbean (0.6) and Norwegian Cruise Line (0.7). The company's high leverage has limited its ability to invest in new ships, routes, and technologies. However, with strong cash flows from operations and asset sales, Carnival is actively working to reduce its debt burden, which stood at $13.6 billion in Q3 2024, down from its peak of $15.9 billion in 2020.



As Carnival focuses on strengthening its financial position, investors should be mindful of the company's potential for turnaround. With demand for cruises remaining robust, Carnival is well-positioned to capitalize on the growing interest in travel and leisure experiences.

In conclusion, investors should not overlook the potential of undervalued consumer goods and services companies, even in a bull market dominated by tech giants. Domino's Pizza and Carnival present attractive risk-reward profiles, with strong fundamentals and long-term growth prospects. By carefully monitoring their performance and considering the broader market context, investors can capitalize on these opportunities and enhance their portfolios.

As the bull market continues to roar, investors must remain vigilant and adaptable, seeking out undervalued stocks that offer compelling investment cases. By doing so, they can participate in the broader market's growth while also uncovering hidden gems that have the potential to outpace the market's gains.