In a market that is sometimes obsessed with consumer names and high-flying tech companies, lesser-known stocks frequently go unnoticed. But among these many missed chances, three sleeper stocks have the potential to outperform the market and rise above their 52-week lows. These three equities present investors with bright growth possibilities and have quietly made big moves in their respective industries. They prioritize user engagement programs, a testament to their customer-centric approach, smart debt reduction, and robust performance.
The first company has been assiduously lowering its debt load, consolidating its finances, and clearing the path for upcoming investments and value returns. The second one, with a solid financial base, has shown exceptional user engagement and steady revenue growth in the face of intense competition in e-commerce. Meanwhile, the third one has demonstrated tenacity in its pharmacy services in the face of retail setbacks, suggesting unrealized potential for expansion in healthcare solutions.
Overall, these companies have prospects that go beyond the obvious. Their growth methods and distinctive core qualities enable them to surpass market expectations and yield significant profits.
Warner Bros. Discovery (WBD)
The company’s solid progress in lowering its debt load bolstered Warner Bros. Discovery’s (NASDAQ:WBD) potential for rapid expansion. During Q4 2023, Warner Bros. Discovery paid down $5.4 billion in debt, increasing the total debt that has been reduced since the purchase closed to more than $12.4 billion. Its net leverage ratio is 3.9 times EBITDA. This is a significant decrease from earlier levels. Despite these developments, the company’s primary objective is to continue deleveraging, with a long-term gross leverage target of 2.5 to 3 times EBITDA.
Additionally, debt reduction improves Warner Bros. Discovery’s base flexibility by decreasing the interest load and the risk attached to excessive leverage. Warner Bros. Discovery now has more cash($4.3 billion) and manageable debt due over the next three years, increasing its fundamental ability to make sharp acquisitions and investments. All existing debt has fixed rates, averaging 4.6% over the past 15 years. Hence, this fixed-rate arrangement offers security and defense against changes in interest rates.
To sum up, Warner Bros. Discovery reduces the risk of increasing interest rates by switching from variable-rate to fixed-rate debt.
JD (JD)
The active customers at JD (NASDAQ:JD) increased in Q4 2023, indicating a solid rise in user engagement. An even quicker rise in new users demonstrated that user acquisition activities were succeeding. Thanks to an increase in devoted current users and members, user shopping frequency on JD increased during Q4 and 2023, suggesting increased user stickiness and a greater likelihood of making more purchases. Order volume growth is steady, reaching double digits year over year in Q4 and climbing for three straight quarters. Similarly, user transactions and platform utilization are also rising.
Moreover, net revenues increased 3.7% for 2023 and 4% for Q4 year-over-year (YoY), showing steady revenue growth despite difficulties. Non-GAAP net income climbed dramatically to RMB 35.2 billion in 2023. Operating cash flow was RMB 59.5 billion for 2023 compared to RMB 57.8 billion for 2022. Therefore, healthy cash flow reflects solid financial health and an operational edge.
Finally, the company’s focus on boosting valuation is reflected in its approval of a new share repurchase program of $3 billion over the next 36 months.
Walgreens Boots Alliance (WBA)
Sales for Walgreens Boots Alliance (NASDAQ:WBA) rose 6.3% YoY in Q2 2024 to $37.1 billion, with growth across every category. Similarly, sales in the international division climbed by 3.2% YoY, primarily due to Boots UK and Germany’s good performance. In the U.S., sales of retail pharmacies increased by 4.7%, while healthcare sales jumped by 33% YoY.
Moreover, despite a 29.5% fall in adjusted operating income in the U.S. retail pharmacy sector, the overseas segment recorded a rise in adjusted operating income (AOI) of 3.2%. On the other hand, the U.S. healthcare business had its first-ever positive adjusted EBITDA quarter, suggesting room for expansion in this domain.
Further, Walgreens Boots Alliance performed well in pharmacy services despite difficulties in the retail sector. Specifically, Pharmacy services, volume growth, and brand inflation contributed to an 8.7% increase in pharmacy comp sales. With a vital YoY growth trend, the U.S. Healthcare division recorded its first-ever positive adjusted EBITDA quarter. Lastly, Shields, a company in the U.S. healthcare category, saw strong adjusted EBITDA growth compared to the same quarter last year, demonstrating the efficacy of tactics meant to maximize market value.
As of this writing, Yiannis Zourmpanos held long positions in WBD, JD and WBA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.