Warren Buffett, arguably the greatest investor of all time, once said it is wise for investors to be fearful when others are greedy. One way to apply this advice from the Oracle of Omaha is to look at a soaring stock market and identify companies that aren't performing nearly as well -- or are just performing poorly -- but still have attractive prospects.

Two such candidates to consider right now are Etsy (ETSY 0.70%) and Exact Sciences (EXAS 2.42%), which are down 59% and 34%, respectively, over the past three years. Here's what investors should know about these beaten-down companies.

ETSY data by YCharts.

1. Etsy

Etsy, an e-commerce platform, has been in free fall for the better part of three years as it dealt with economic troubles. Etsy's platform offers vintage and handmade goods, which are not known for being cheap. The e-commerce specialist also has to contend with growing competition in the field.

As a result, Etsy's financial results have not been great in recent years. Revenue growth is down significantly, and earnings haven't been impressive either:

ETSY Revenue (Quarterly) data by YCharts.

That said, the sell-off might be a bit overdone. Etsy's shares now look like they are trading at very reasonable levels:

ETSY PE Ratio (Forward) data by YCharts. P/E = price-to-earnings ratio; P/S = price-to-sales ratio.

With a forward price-to-earnings ratio of 10.5, Etsy looks inexpensive; for context, the average forward P/E for the consumer discretionary industry is 28.5. A price-to-sales ratio of 2 or under and a price-to-free-cash-flow multiple of 10 or under, both of which Etsy now has, are also considered "good."

Besides Etsy's reasonable valuation, its industry prospects and competitive advantage make it attractive for long-term investors. Let's start with the latter.

Etsy benefits from the network effect. Merchants in the vintage and handmade goods trade know where to go to find takers for their products. The more of them there are on Etsy's platform, the more they attract buyers -- and vice-versa. That doesn't guarantee that Etsy will never lose buyers, but the company's reputation in its niche, and large existing ecosystem, should help it remain one of the leaders for a while.

Meanwhile, Etsy has only captured 2% of its massive addressable market, which is worth more than $500 billion. The e-commerce industry will remain in growth mode for a while, providing plenty of opportunities for the company to bounce back. It might take some time, but in my view, Etsy looks attractive for long-term investors, especially at current levels.

2. Exact Sciences

Exact Sciences develops cancer diagnostic tests. The company's most popular product is Cologuard, an at-home, noninvasive test for colorectal cancer. This is the second-leading cause of cancer death worldwide, although it's highly manageable when caught early enough -- so not enough people are being screened. In the U.S., about 60 million eligible patients remain unscreened, leaving a significant market opportunity for Cologuard.

Still, Exact Sciences has not performed well recently for at least two reasons. First, Cologuard now has more competition: Last year, Guardant Health (NASDAQ: GH) launched its Shield blood test for colorectal cancer. Second, Exact Sciences remains unprofitable, and with more competition for its top product, it may be hard for the company to show green on the bottom line.

Fortunately, some developments favor Exact Sciences. It earned clearance for a next-gen version of Cologuard that compares favorably to Guardant Health's blood test. For instance, the sensitivity (rate of true positives) of Cologuard Plus in clinical trials was 93.9%, much higher than Shield's 83.1%. That means the introduction of Shield won't erode Cologuard's market share.

Also, this second-generation Cologuard is 5% cheaper to manufacture than its predecessor, so it will help decrease expenses and boost the bottom line. And the company plans to launch two other new cancer tests this year, including a multi-cancer screening option.

Exact Sciences recorded total revenue of $2.76 billion for 2024, 10% higher than the previous fiscal year. That's a growth rate below what investors want to see, but launching three new cancer tests this year will help.

Along with stronger revenue growth for Exact Sciences, you can expect less spending on marketing and advertising (since it's already done much of the groundwork in the healthcare system to raise awareness about Cologuard). Eventually, the company should become profitable. While the past few years have been difficult, the stock can still deliver excellent returns in the next five years and beyond.