3 Top Stocks You Can Buy on Sale

It's challenging to find stocks on sale in today's market. Most of the stocks selling at a discount are deeply flawed companies that are cheap for a reason. The few worth considering, though, are likely facing some short-term headwinds that Wall Street can't seem to look past. For investors with a longer investment time frame, though, stocks selling for a discount due to near-term issues could be great investments several years from now.

Here's why the short-term issues at industrial and frack sand supplier U.S. Silica Holdings (NYSE: SLCA), iron ore producer Cleveland-Cliffs (NYSE: CLF), and rail car manufacturer The Greenbrier Companies (NYSE: GBX) could be an opportunity for long-term profits.

A lot of pessimism for an improving outlook

If you look at U.S. Silica's most recent earnings results and the trends in the oil patch over the past year or so, you'll find a company that is hitting its stride. Sales volumes are up considerably, the average realized price per ton is increasing as spare production capacity gets eaten up, and margins are expanding thanks to its investments in last-mile logistics. This has boosted U.S. Silica's most recent quarterly earnings back to pre-oil-price-crash levels, yet the stock price has curiously been on the decline this year.

Wall Street's fear seems to be that the market for sand is about to cool down just at a point when U.S. Silica and the other three large sand suppliers plan to bring new mines online in the next six to nine months. That could lower prices and put pressure on margins again.

That is certainly a distinct possibility, but U.S. Silica is better suited to handle a weaker market today, and shale drilling is much more resilient in places like the Permian Basin, where U.S. Silica and others are adding capacity. As it stands, the company has more cash on hand than total debt outstanding, which will make dedicating cash to its new sand mine much more palatable.

Perhaps the market for sand will start to flatten out, but it is flattening out at a time when business is good and will likely stay that way for a while. With U.S. Silica's stock trading at such depressed prices, now is a good time to take a look.

This turnaround's just about complete

When Cleveland-Cliffs -- formerly Cliffs Natural Resources -- CEO Lourenco Goncalves took the helm back in 2014, Cliffs was in a bad place. It was riddled with unprofitable assets and an enormous debt load. Over the past three years, though, management has divested itself of those poorly performing business segments to focus on its core U.S. iron ore operations and its mine in Australia.

So far, the plan has worked. Even though iron ore prices remain weak, the company has returned to profitability and reduced its net debt by 57%. Now that management has trimmed down its asset portfolio, it's focused on expanding again by building a new facility to supply reduced iron, the product that America's modern electric arc furnaces need to manufacture steel.

Despite the changes that Cleveland-Cliffs has made to its business over the past several years, it seems that the market has yet to catch on to these developments. The company's stock trades at a reasonable enterprise-value-to-EBITDA ratio of 8, and that is while EBITDA levels remain low because of weak commodity prices.

There was a time when Cliffs looked to be on the brink of insolvency, but management has trimmed the company down to fighting weight and is now in a better position to handle the challenges of today's iron ore and steel markets in North America.

A temporary swoon with brighter times ahead

There were a lot of mixed messages in Greenbrier's most recent earnings report. Sales and rail car deliveries were down significantly compared to this time last year, but those declines didn't seem that bad, as the company's new orders picked up and it now has a backlog of orders totaling $3.1 billion.

Management makes no secret that this year and possibly calendar year 2018 will be challenging as the North American market goes through fits and starts. However, there are reasons to think that this stock -- which trades at a very cheap enterprise-value-to-EBITDA ratio of 4 -- has better times ahead of it.

Manufacturing rail cars is an inherently cyclical business, but Greenbrier is looking to offset the cyclical nature of the business by moving into more replacement parts and expanding internationally. This past quarter, management signed several joint venture deals and a new supply contract that will add it its order backlog outside North America.

Combined, these moves should give Greenbrier plenty of growth levers to pull over the next couple of years. With the company's balance sheet looking significantly better than it did a few years ago -- it has almost as much cash on hand as total debt outstanding -- the company should be poised to generate better returns down the road. Considering Greenbrier's stock price, this seems like a low-risk investment with a good chance at making investors quite a bit of money.

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Tyler Crowe owns shares of Cleveland-Cliffs. The Motley Fool recommends The Greenbrier Companies. The Motley Fool has a disclosure policy.