Is Now a Good Time to Buy Stocks?

Key Points

• The S&P 500 now trades at a stretched price-to-earnings ratio of more than 25, while the Nasdaq Composite sits at about 33.

• Some growth favorites look priced for perfection today. But not all stocks have risen sharply in this market.

• When picking stocks today, selectivity is key.

• 10 stocks we like better than Lululemon Athletica Inc. ›

After a monster run in 2024, U.S. stocks have kept climbing in 2025. The S&P 500 and the Nasdaq Composite set fresh highs in September. Valuation has expanded with the rally. FactSet pegs the S&P 500 index's forward price-to-earnings ratio at roughly 22.5 -- above its five- and 10-year averages -- reflecting lofty expectations and little room for disappointment. Meanwhile, many widely owned growth stocks have seen their shares surge even faster.

That backdrop naturally raises a basic question: Should investors be buying stocks here? The short answer is yes -- with restraint. Chasing what is already expensive could prove unrewarding. But taking a hard look at high-quality names that corrected this year is not a bad idea. Following are two stocks -- Lululemon Athletica (NASDAQ: LULU) and Old Dominion Freight Line (NASDAQ: ODFL) -- that offer a more balanced risk-reward in this market, along with one that shows why caution still matters.

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Image source: Getty Images.

Lululemon: a strong brand at a reset price

In 2025, Lululemon Athletica (NASDAQ: LULU) has reminded investors that even elite retailers can hit a rough patch. Earlier this month, the company cut its full-year outlook following softer trends in the U.S. It now expects 2025 revenue to grow 2% to 4% and guided full-year earnings per share to $12.77 to $12.97. Shares, down sharply from late-2024 highs, recently traded in the mid-$170s, placing the stock at roughly 14 times the midpoint of that earnings outlook. Unlike some of 2025's high-flying growth stocks, this is a level that is far from being priced for perfection.

The investment case is simple: international remains a growth engine, the balance sheet is clean, and gross margin is still healthy for a retailer. Key risks include a prolonged U.S. slowdown and higher tariffs weighing on costs. But with expectations reset and valuation compressed, Lululemon looks like a reasonable way to add consumer exposure without paying peak multiples.

Old Dominion Freight Line: high quality, now at a lower valuation

Old Dominion Freight Line (NASDAQ: ODFL) is arguably the best-run less-than-truckload carrier in the United States. But 2025 has not been easy. In the second quarter of 2025, revenue declined year over year amid soft industrial demand, and its operating ratio worsened to 74.6% from 71.9% a year ago.

Management is keeping its playbook intact (service quality, cost discipline, and network density) while waiting for freight demand to recover.

"Old Dominion's financial results in the second quarter reflect the ongoing softness in the domestic economy," said Old Dominion CEO Marty Freeman in the company's second-quarter earnings release. "While the challenging macroeconomic backdrop created demand headwinds for our business during the quarter, our market share remained relatively consistent and our team continued to execute on our long-term strategic plan."

Importantly, the stock's valuation has cooled. Recent prices imply a price-to-earnings ratio in the high 20's. But this multiple is on cyclically low earnings. Overall, the premium may be more than justified if volumes stabilize and pricing improves in 2026.

The risk, of course, is obvious: a longer industrial slowdown could keep revenue and margins under pressure. Even so, for investors who want a durable operator in U.S. freight and are willing to hold for the long haul, Old Dominion's reset looks like a good buying opportunity.

Why being choosy matters

One counterexample underscores today's valuation risk. Palantir Technologies (NASDAQ: PLTR), a software and AI platform provider, is executing exceptionally well -- second-quarter revenue rose about 48% year over year, and guidance calls for further acceleration. Yet the stock's valuation implies perfection. Based on a market capitalization of roughly $421 billion against trailing-12-month revenue near $3.4 billion, Palantir trades at well over 100 times sales (about 124 to be exact). Great businesses can justify premiums, but this is a staggering one that could compress quickly if growth cools, competition rises, or federal contract timing slows.

With indices richly valued, investors shouldn't avoid stocks altogether. They should, instead, be more selective. One way to do this is to lean into high-quality companies whose shares have already absorbed bad news and now trade at more defensible valuations. Lululemon's reset and Old Dominion's premium-but-fair multiple fit that bill. By contrast, paying extreme prices for momentum favorites leaves little margin for error. In other words, heed the old advice to be cautious when others are greedy. But that doesn't stop you from continuing to invest by choosing carefully.

Should you invest $1,000 in Lululemon Athletica Inc. right now?

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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Lululemon Athletica Inc., Old Dominion Freight Line, and Palantir Technologies. The Motley Fool has a disclosure policy.