2 Comeback Stocks to Buy for 2025

While Paycom (NYSE: PAYC) and Hanesbrands (NYSE: HBI) registered gains in 2024, both stocks have tumbled from their all-time highs. Paycom is sacrificing near-term growth to take advantage of a long-term opportunity to the ire of Wall Street, and Hanesbrands is fixing its balance sheet and stabilizing after a rough post-pandemic period.

While there are no guarantees, both Paycom and Hanesbrands look ripe for further gains in 2025 and beyond.

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Paycom

Shares of payroll software provider Paycom have rebounded recently but are still down big from their pandemic-era high. The stock has shed more than 55% of its value since its peak a few years ago, with the decline partly driven by the unintended downsides of a new product.

Paycom has been rolling out Beti, it's automated payroll solution that gives employees visibility into their paychecks and the ability to fix issues before payday. The value proposition for Paycom's customers is simple: Payroll staff can spend less time troubleshooting and fixing issues since many of those issues can be resolved ahead of time.

Here's the problem: Beti has led to a decline in some other types of revenue for Paycom as the new product cannibalizes other products and services. Paycom stock tanked late last year as this became apparent, and overall revenue growth has been sluggish ever since.

This is a classic case of short-term thinking on Wall Street. Providing a product that saves customers time and money is a winning long-term proposition for Paycom, even if it stings a bit right now. With Beti, Paycom's customer base is likely to become even stickier as they get more value out of the company's platform.

The cloud over Paycom stock started to clear in October when the company reported solid third-quarter results that featured an acceleration in revenue growth. Shares trade for around 30 times forward earnings, which isn't particularly cheap. However, the bottom line is also being depressed by the short-term headwinds posed by Beti. As the benefits of Paycom's strategy play out in 2025 and beyond, both earnings and the stock price could soar.

Hanesbrands

It's been a tough post-pandemic period for Hanesbrands, a leading manufacturer of innerwear, and the stock has suffered severely. However, there's finally some light at the end of the tunnel.

Hanesbrands has successfully knocked down its bloated inventory levels, reduced its debt, and sold its struggling Champion business. Cash flow remains in positive territory, and the company now appears to be on the right track.

The company's third-quarter results were far from perfect, with sales down slightly year over year. However, there was quite a bit of good news. The company completed the sale of its Champion business soon after the third quarter ended, and the proceeds are going toward debt reduction. By the end of the year, Hanesbrands expects to have reduced its debt by about $1 billion.

Hanesbrands expects to produce free cash flow of $210 million this year, which is well below historical levels but still squarely in positive territory. Reducing the debt will also reduce interest payments, which should help drive a free-cash-flow recovery in 2025. Even at this depressed level, Hanesbrands stock trades for about 15 times forward free cash flow.

Hanesbrands has successfully stabilized itself and shored up its balance sheet. While this isn't a growth stock by any means, the comeback story could drive some serious gains in 2025 and beyond.

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Timothy Green has positions in Hanesbrands and Paycom Software. The Motley Fool has positions in and recommends Paycom Software. The Motley Fool has a disclosure policy.