When buying stocks, cheap is good. Or at least cheap can be good. The trick for investors is to identify companies that are performing well but have stocks that are trading for a discount. That can sometimes be a challenge, but in the case of Redfin (NASDAQ: RDFN) and Magnite (NASDAQ: MGNI), now is a great time to buy both, and each is worthy of every investor's portfolio.

Image source: Getty Images.

1. Redfin

Anyone who has bought or sold a house knows the process can be stressful and expensive. Redfin is trying to change that with some unique twists on an old industry. First of all, its agents are salaried employees who don't earn a commission. Second, Redfin only charges sellers a commission between 1% and 1.5%, as opposed to the traditional 2.5% to 3%. The company also refunds homebuyers a portion of those commissions. Redfin's long-term vision is to become a one-stop shop for the buying and selling experience, combining brokerage, mortgage, and title services into one tech-enabled platform. The company has even gotten into the iBuying space, where it will buy a home and sell it for the homeowner.

After a tough go of it during the pandemic, things have turned around for Redfin, culminating in the last reported quarter. The third quarter saw year-over-year revenue growth of 128% and steps toward profitability with a net loss of $19 million, compared to the net loss of $36 million posted in the first quarter. Gross profit also increased 37%, although gross margin slipped a bit compared to Q3 of 2020. Management attributed this to greater revenues generated from its lower-margin property business.

On the customer front, things also look good. Redfin reached a market share of 1.16%, up from 1.04% in Q3 of 2020, meaning the company is slowly gaining market share. Monthly average visitors to its website and real estate services transactions were down slightly year over year, but that's coming off an outlier of a quarter in 2020 when both of those metrics saw big jumps.

Redfin is trading at a price-to-sales ratio of 2.7, meaning the shares are about as expensive as they were in the spring of 2020 when the company was in the worst of the pandemic. Redfin is in a much stronger position now, making this valuation very attractive.

Image source: Getty Images.

2. Magnite

Magnite operates a platform to help connect buyers and sellers of digital advertising, primarily in the connected television (CTV) space. With the explosion of streaming television and online and mobile advertising, Magnite is operating in a fast-growing industry and has become the largest independent sell-side platform (helps those with ad space available to fill it with ads) for these digital advertisements.

Magnite has taken advantage of this industry's tailwinds and executed well. When the company reported third-quarter earnings, revenue was up 116% year over year, which built on a 62% year-over-year increase in Q3 of 2020. Of this revenue growth, the vast majority came from connected television, which is essentially all the streaming services that have sprung up over the past several years. In Q3, CTV accounted for 38% of overall revenue, up from 18% in the year-ago quarter. Management sees CTV as a critical part of its business and over the course of 2021 it acquired two companies, SpotX and SpringServe, to help solidify its position in this space.

Even if you exclude the acquisitions of SpotX and SpringServe, Q3 CTV revenue grew 51% year over year. It's clear that CTV revenue is going to drive growth for the foreseeable future, and to that point, "CTV" was mentioned 56 times on the earnings call.

Magnite seems to be well-positioned to benefit from the transition from traditional to connected television advertisement sales, and while the company is still in the early innings of this growth trend, its stock can be had for a very attractive price. Since its peak in early 2021, Magnite's price-to-sales ratio has been in free fall, ending trading on Jan. 7th at 5. If year-over-year revenue can continue to grow in the triple-digits as it has for the past two quarters, the stock is a steal at this valuation. However, Magnite is positioned well enough in a growing industry that even if the company stumbles a bit, it is still valued cheaply enough to make buying shares now an enticing proposition.

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Jeff Santoro owns Magnite, Inc and Redfin. The Motley Fool owns and recommends Magnite, Inc and Redfin. The Motley Fool recommends the following options: short February 2022 $65 puts on Redfin. The Motley Fool has a disclosure policy.