4 Magnificent Stocks I'm Done Waiting on a Dip for in 2024 -- but I'm Not Buying Them Hand Over Fist, Either | The Motley Fool (2024)

None of the stocks in this article will jump off the screen at you as blatant "value" opportunities. However, I'd argue that these excellent businesses are justified in commanding premium valuations from the market.

Whether it's Celsius Holdings (CELH -1.65%) and its triple-digit growth rates, Cintas (CTAS -0.12%) and its lengthy track record as an industry-leading compounder, or Rollins (ROL 0.51%) and Zoetis (ZTS 2.24%) and their recession-resilient operations, these companies are all best-in-class in their own ways.

This combination of top-tier operations and expensive valuations makes these stocks perfect candidates for dollar-cost-averaging (DCA) purchases. While I want to finally put some skin in the game on each of these investments, I don't want to go all in at these valuations -- making DCA the perfect option for these stocks in 2024.

Celsius: Forward price-to-earnings (P/E) ratio of 58

Boasting peer-reviewed evidence of thermogenic and fat-burning capabilities, Celsius' functional energy drinks have stormed the investing scene in the past decade, with the company's share price up over 45,000%.

Despite this incredible run, the energy drink maker's future may be even more promising. Signing a distribution agreement with PepsiCo in 2022, Celsius received a $550 million investment from the beverage juggernaut for 8.5% of its shares outstanding.

With access to Pepsi's massive distribution network, Celsius drinks were sold in many new channels it previously couldn't reach, like colleges, healthcare facilities, food service providers, hotels, casinos, and airports. These new verticals further boosted the company's incredible sales growth, helping it post a 104% increase in its most recent quarter.

In addition to revitalizing Celsius' growth story, this partnership with Pepsi appears to be streamlining the company's efforts toward sustained profitability. Since the transaction was closed in August of 2022, Celsius has seen its gross profit margin improve from 42% to 50%. It even had a net profit margin of 22% in its last quarter -- nearing the 24% margin of Monster, its largest publicly traded energy drink peer.

Pairing this newfound profitability with triple-digit growth rates, I'm more than happy to pay a premium and DCA into a small position in Celsius -- now the most-sold energy drink on Amazon.

Cintas: Forward P/E of 41

Prepping over 1 million of the 16 million businesses in North America for work, Cintas provides uniform rentals, facility services (mats, mops, restroom supplies, and microfiber towels), first aid, safety devices, and fire protection services. While this may sound like a dull investment proposition, it perfectly encapsulates the power of the investing "snap test."

If I were to snap my fingers and all of Cintas' products disappeared overnight, it would wreak havoc (at least temporarily) on many businesses' ability to get any work done. While items like scrubs at hospitals, chef's uniforms, and fire extinguishers could be replaced by competitors with enough time, Cintas' customers would much rather not see this ever happening.

That's the beauty behind Cintas -- it does the ugly, behind-the-scenes work for businesses so they can focus on their actual operations.

And the good news for investors? Cintas doesit in a highly profitable manner.

Growing its return on invested capital (ROIC) from 10% in 2014 to 22% today, the company's ability to generate net income from its debt and equity is top-tier and improving with time. Operating in a highly fragmented market, a high ROIC is a promising sign for Cintas, as it highlights an ability to make shrewd acquisitions and deploy new capital in under-penetrated geographies across North America.

These factors make Cintas a perfect DCA-and-hold-forever business, home to steady growth and a dividend that's increased for 40 straight years.

Rollins: Forward P/E of 43

Home to a family of pest control brands, most notably the Orkin label, Rollins might be one of the most slept-on 100-baggers on the market -- reaching that milestone in just over 20 years.

ROL Total Return Level data by YCharts

Much like Cintas, Rollins leans on its masterful ability to generate increasing profits from its debt and equity, averaging an ROIC of 29% over the last decade. A strong ROIC like this should catch investors' attention as it has been proven that stocks with higher scores on this metric tend to outperform their lower-rank peers, as this article explains.

For Rollins specifically, a high ROIC is crucial to its long-term success due to its nature as a serial acquirer. Making numerous tuck-in acquisitions annually, Rollins has spent an average of 7% of its total sales on acquisitions over the last 10 years.

ROL Net Divestitures (Acquisitions) (% of Annual Revenues) data by YCharts

Generating a top-tier ROIC from this heavy spending on acquisitions highlights management's continued ability to make wise investments over time, helping to explain its jaw-dropping total returns in the 21st century. With a track record like Rollins', I'd say it would be wild if the company didn't trade at a premium valuation.

Zoetis: Forward P/E of 33

Providing medicines, vaccines, diagnostics, tests, and other services to pet and livestock animals, Zoetis is the global leader in what might be one of the most recession-resilient businesses out there -- caring for animals. As the market leader for companion animals (dogs and cats), cattle, fish, and swine, Zoetis sells to over 100 countries and operates across seven therapeutic areas.

Home to 15 separate blockbuster products (more than $100 million in sales), the company has become a well-diversified animal healthcare juggernaut since its spin-off from Pfizer in 2013. Leaning on a handful of acquisitions and a research and development team that has created over 2,000 new products or lifecycle innovations since 2014, Zoetis continuously reinvents itself.

The most important part about this spending from Zoetis is that it comes along in tandem with an ROIC that has risen from 9% to 20% over the last decade. This demonstrates that not only is the company willing and able to innovate, but it is doing so at an increasingly profitable rate.

With 86% of pet owners in a HABRI/Zoetis study stating they would pay whatever it takes to keep their pets healthy -- and the obvious necessity for livestock operations -- Zoetis is a perfect selection for my final stock to DCA into with time in 2024.