2 Stocks Down 28% and 34% to Buy and Hold

Major U.S. market indexes have performed well this year and are near all-time highs, but that's largely driven by large technology and artificial intelligence-focused companies. It's not that hard to find beaten-down stocks once we step outside the relatively small group of stocks that are pulling equities in the right direction, and some of those market laggards look particularly attractive on the dip. That's the case with TransMedics Group (NASDAQ:TMDX) and SoFi Technologies (NASDAQ:SOFI), two stocks that have declined by 28% and 34%, respectively, over the past year. Here's why it's worth considering investing in these companies right now.

Image source: The Motley Fool.

Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »

1. TransMedics Group

TransMedics Group has helped revolutionize organ transplant. The company developed the Organ Care System (OCS), a device designed to keep organs in good shape before transplants. Why is this important? The traditional cold storage method of storing organs can damage them and make them unusable for transplant, which is a big problem considering there is already a shortage of available organs.

The OCS, which is approved for hearts, livers, and lungs, aims to mimic human physiology, notably by maintaining organ temperature and supplying them with blood during storage and transport. TransMedics Group has been successful, but there are at least two problems with the company right now: revenue growth is slowing, and profits are declining.

In the second quarter, TransMedics Group's revenue increased by almost 21% year over year to $189.9 million. Here's how that compares to recent quarters' growth rates.

TMDX Revenue (Quarterly YoY Growth) data by YCharts

Further, TransMedics Group's adjusted earnings per share came in at $0.44, 52% lower than the year-ago period. Recent financial results partly explain why the stock has declined significantly over the trailing-12-month period. That said, TransMedics Group is deliberately investing in various initiatives, including potential approval of its technology for kidney transplants and a logistics network that gives it greater control over the entire organ transplant cycle, from organ retrieval to transport and delivery.

In my view, these efforts could pay off down the road, even as they harm profits in the near term. And there is still a large addressable market ahead for the company. That's why the stock could be a great buy on the dip.

2. SoFi Technologies

SoFi, a fintech specialist, posted strong second-quarter results. The company's revenue grew 43% year over year to $1.2 billion, while its net income jumped 61% to $156.6 million. The problem is, strong financial results were already factored into the share price. SoFi's forward price-to-earnings ratio was quite high, above 45, earlier this year -- the average for financial stocks has hovered below 20.

SOFI PE Ratio (Forward) data by YCharts

Further, SoFi's guidance was disappointing, coming up short of analyst estimates. That's not to mention the somewhat uncertain interest rate outlook, which could put pressure on its lending business. All of that means that SoFi's near-term outlook is uncertain, but the company could still be a great pick for long-term investors.

SoFi Technologies has an expanding customer base. Member growth in the second quarter was 35% year over year to 15.8 million. There is a meaningful opportunity to cross-sell additional products to more members. The company ended the second quarter with 24.4 million products, up 42% year over year. That's just 1.5 products per member on average, even though it offers far more. And the company has also continuously expanded its product offering in recent years, even bringing back cryptocurrency trading to the platform.

Meanwhile, SoFi's entirely online model eliminates some overhead costs, resulting in cost savings it can pass on to customers in various ways. The company could establish itself as a leading bank over the long term, and after the beating it took in recent quarters, the stock looks much more attractive.

Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends TransMedics Group. The Motley Fool has a disclosure policy.