If a stock is near its 52-week low, it may be a great time to buy it on the dip, particularly if you're bullish on its long-term prospects. But what about when it's trading at more of a discount, and is at prices it hasn't been at in multiple years? In that case, it may be an even better deal. But in such a case, the business is likely also facing some significant challenges -- stocks don't just accidentally fall to such levels.
In those kinds of cases, investors may need to have confidence that the business can get back to profitability or growing its operations, whatever is needed to turn the stock's fortunes around. It can make for a risky play, but it can also lead to strong returns if the company is successful.
Three stocks that are trading near multi-year lows today are Hershey (NYSE: HSY), PepsiCo (NASDAQ: PEP), and Moderna (NASDAQ: MRNA). Here's a look at whether these stocks are worth picking up and adding to your portfolio today, or if they're simply too risky to invest in.
Hershey
Candy company Hershey is trading near its 52-week low. The last time you could have picked up the stock for a cheaper price was in early 2021. It's near a four-year low, as demand has been slowing down after sales have expanded for multiple years.
Over the course of the first nine months of 2024, sales totaling $8.3 billion declined by more than 2%, and earnings totaling $1.4 billion fell by 6%. The company has been dealing with higher cocoa prices affecting its bottom line, and a challenging macroeconomic environment with consumers scaling back on discretionary purchases. The business is working on controlling costs in order to boost its bottom line in future quarters.
Hershey is a cheap stock to own, trading at 18 times its trailing earnings. While it has been struggling, its payout ratio remains at around 60%, suggesting that its high-yielding dividend of 3.6% (which is higher than the S&P 500 average of 1.3%) is safe. For dividend investors who are willing to be patient with the stock, this could be a good time to add Hershey to your portfolio. It has many top brands, including Reese's and Twizzlers, and may still be a solid investment to hang on to over the long haul.
PepsiCo
Food and beverage company PepsiCo has also been feeling the effects of slowing demand in the market. For the 36-week period ending Sept. 7, 2024, the company's net revenue totaled $64.1 billion and was up just 0.7% year over year. While its earnings per share has grown by 4%, business hasn't been all that strong. Volumes have been declining, negating the effect of the company raising its prices.
PepsiCo stock also hasn't been trading at the levels it's at right now since mid-2021. It's a bit more expensive a stock than Hershey, trading at 22 times its trailing earnings, but it also pays a dividend which yields 3.7%. The stock is a Dividend King and has raised its dividend for 52 consecutive years. It's another investment that may be attractive to buy and hold due to its reduced valuation and high-yielding payout.
The short term may continue to be bumpy for PepsiCo, but with a diversified mix of snack and beverage brands, the business should be able to bounce back in the long run.
Moderna
Healthcare company and COVID-19 vaccine maker Moderna has effectively given back the gains it generated since the start of the pandemic. It's now trading at around the price it was at in April 2020. A few years ago, investors would have easily snapped up a deal like this, being able to go back in time and buy shares of the vaccine maker before its business took off and the stock become a big name in the healthcare industry.
However, with COVID-related sales on the decline and Moderna's future a big question mark at this point, investors are struggling to determine what the business is truly worth. At a market cap of $13 billion, this is a stock whose valuation can go much lower in the future. Moderna has recently reduced its guidance and is in cost-cutting mode, as the business isn't in great shape right now. During the first nine months of 2024, the company incurred a $2.7 billion loss from operations, which was actually an improvement from a $4.2 billion loss in the prior-year period.
This is the one stock on this list I wouldn't buy, simply due to the uncertainty ahead for Moderna. Until the company can show investors it has a way of consistently growing its operations and is able to get out of the red, it's a stock I'd avoid.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hershey. The Motley Fool recommends Moderna. The Motley Fool has a disclosure policy.
