These Quality Stocks Are Becoming A Deal For Long-Term Investors

The stock market indices have been declining since August, along with most stocks. The sell-off has been accelerating in the latter part of October. The SPDR S&P 500 Trust SPY is down 10% from its July high.

While the market decline can be uncomfortable to watch, it also presents opportunities. Stocks, including high-quality ones with strong earnings and steady growth, are getting cheaper. While it is unknown how far this decline will go, buying quality companies at reasonable prices is often a good play for the long-term investor. 

Here are a few quality names to consider. 

Copart, Inc. 

Copart, Inc. CPRT, a top buy-and-hold stock, has grown earnings by an average of 24.2% per year over the last five years, and analysts expect 22.3% average yearly EPS growth over the next five years. That is nearly triple the median expected growth of S&P 500 stocks. 

Over the last five years, P/E values have ranged between 20 and 50, so the current P/E of 34 is a fair price based on historic norms. A P/E of 25 to 30 is a good deal for this strongly growing company.

Cadence Design Systems, Inc.

Cadence Design Systems, Inc. CDNS, has grown earnings by an average of 33.4% per year over the last five years, and analysts expect 19.1% average yearly EPS growth over the next five years. This is more than double the median expected growth of S&P 500 stocks.  

Over the last five years, P/E values have ranged between 18 and 79, but those low values were only around for a brief period in 2020. The current P/E of 65 is on the high end, but values don't fall below 55 very often. Paying a P/E between 60 and 50 is a decent to good value based on historical norms. That could be seen if the stock keeps sliding lower or if earnings continue to increase as expected.

Alphabet Inc.

Alphabet Inc. GOOGL has grown earnings by an average of 28.8% per year over the last five years, and analysts expect 19% average yearly EPS growth over the next five years. 

Over the last five years, P/E values have ranged between 15 and 48, so the current P/E of 23 is near the lower end of that range indicating an attractive price for the growing company. 

ExlService Holdings, Inc.

ExlService Holdings, Inc. EXLS has grown earnings by an average of 32.7% per year over the last five years, and analysts expect 14.9% average yearly EPS growth over the next five years.

Over the last five years, P/E values have ranged between 24 and 55, so the current P/E of 26 is one of the cheapest levels the stock has traded at in the last five years. 

Due your own due diligence before investing, considering your own risk tolerance and that these stocks could fall or rise. Consider waiting for the major indices to exhibit bottoming signals before buying individual stocks. It is easier to swim with the tide than against it.

Disclaimer: the author owns GOOGL and EXLS in a long-term portfolio, and has no current plans to sell. The author may add CPRT and CDNS in the future at a more attractive buy point.

This content is for informational purposes only and is not intended to be investing advice.