2 Magnificent Stocks to Buy That Are Near 52-Week Lows

The S&P 500 and Nasdaq Composite indexes have come roaring back from first-quarter lows, but rising tides have not lifted all boats. Some excellent stocks remain underwater through the first five months of the year and are hovering near 52-week lows.

These two are scraping the bottom right now, but look ready to launch off their lows.

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1. McGraw Hill

You may remember McGraw Hill (NYSE: MH) as the leading publisher of textbooks or from when it owned Standard & Poor's. The company went private in 2012 after spinning off Standard & Poor's Global, but it returned to the public markets last July in a slightly different iteration.

The business is still a publisher of educational materials, but instead of textbooks, it offers digital, subscription-based educational content for students of all ages, from pre-K to high school, college, and adult learning.

It is now very much an AI stock, as its vast amount of educational content, which it walls off from outside AI agents and chatbots, is AI-enabled, helping students learn. Its data and protection of said data and content are its biggest advantages.

That's because it's considered higher-value data than chatbots can produce and is designed to help students learn, but not do the work for them. So, it can command higher prices because of the quality of walled-off data and content it produces.

McGraw Hill had its initial public offering (IPO) at about $17 per share last July and is off 30% to around $12 right now. It has had a rough start due to a high amount of debt from leveraged buyouts when it was a private company. This costly debt load contributed to a net loss in the most recent quarter.

The company also took a hit from the overblown sell-off earlier this year in subscription-based software companies for fear of AI disruption. And a recent data breach spooked investors.

But analysts are bullish on McGraw Hill as it digs out from its debt and grows its pipeline, with remaining performance obligations of $1.7 billion.

The stock has a dirt cheap valuation with a forward price-to-earnings ratio (P/E) of 9. And 92% of analysts rate McGraw Hill stock a buy with a median price target of $19, which suggests nearly 60% upside.

2. Booking Holdings

Booking Holdings (NASDAQ: BKNG) is the largest travel company in the world, with properties like Booking.com, Priceline, Kayak, OpenTable, and many more.

The stock has been a steady winner over the years, averaging a 3-year annualized return of 13%, and 5- and 10-year annualized returns of about 12%. Currently, the stock is down about 28% year to date, reaching a 52-week low of $154 on May 18. That's adjusted for the huge 25-for-1 stock split in April.

Booking stock has plummeted in part because of the threat of a software-as-a-service AI disruption earlier this year, which in Booking's case appears entirely overblown. In fact, AI chatbots are expected to help sites like Booking by funneling searches there and generating higher conversion rates, analysts say.

The major problems have been geopolitical conflicts and higher gas prices, which have led to expectations of a temporary pullback in travel. Booking even lowered its guidance due to the conflict in the Middle East and its projected impacts on travel.

Still, Booking expects travel to rebound in the second half of the year and projects fiscal-year revenue growth in the low single-digits and adjusted earnings-per-share growth in the low to mid-teens.

This sell-off has brought the valuation of this market leader down to a very attractive level, trading at just 15 times forward earnings. Looking further out, it is even more attractive, as Booking has a five-year price/earnings-to-growth ratio of 0.72, which means it is undervalued relative to long-term earnings projections.

Wall Street remains bullish on Booking stock. Some 83% of analysts rate it as a buy with a median price target of $220. That would represent a 42% return over the next 12 months.

Things could remain choppy until the situation in the Middle East is settled, but the opportunity to get the market-share leader at such a low price is not one that investors should overlook.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Booking Holdings and S&P Global. The Motley Fool has a disclosure policy.