Investors have mixed ideas about how much valuation should affect their stock-buying decisions. If everything about a company sounds amazing, should a rich valuation matter?

I would break valuation down into three categories. There are some astronomical valuations that simply scream, "Don't buy right now." With expectations that high, the market is bound to be disappointed at some point, sending the stock plunging. Then, there are those in the middle where the valuation is high but not outrageous, and that can generate strong opinions.

The third group are the bargains, where the stocks are cheap despite their long-term growth prospects. Sometimes it's recent performance that's weighing on the stock price, and other times, the market just looks like it's missing the full story. Williams-Sonoma (NYSE: WSM) is an incredible company that's feeling the impact of inflation, and Skechers U.S.A. (NYSE: SKX) just isn't getting investors excited. If you have $500 to invest in the new year, these both look like bargains right now.

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Source Fool.com