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The market has been spiraling and unwinding for the majority of 2022, wiping out last-year returns of many companies. This week, investors are laser-focused on this week’s Fed meeting.
The consensus among investors going into Wednesday’s meeting is that rates will be hiked by a quarter-point for the first time in years, directly affecting growth names that need to borrow more than others. In times like these, I think it is extremely beneficial that investors pivot to stocks that have strong earnings and rock-solid valuation metrics.
Let’s take a look at three companies currently trading at attractive valuation levels that would be good additions to your portfolio.
AutoNation
AutoNation (AN - Free Report) is the largest automotive retailer in the United States. The company offers vehicle maintenance and repair services, vehicle parts, extended service contracts, and other aftermarket services. Additionally, it arranges financing for vehicle purchases through third-party services.
AutoNation shares are up nearly 29% over the last year, easily outpacing the 1.2% return of Zacks Automotive – Retail and Whole Sales sub-industry. The same can be said regarding the S&P 500 over the last year as well, which returned approximately 6.7%, a much lower figure. The chart below compares the performance of the S&P 500 and AutoNation over the last year.
Image Source: Zacks Investment Research
The auto retailer’s future looks promising. For the current year, there have been six upward earnings revisions and the consensus estimate trend has increased by roughly 12.3% to $20.06 per share. Analyzing next year, two upwards estimate revisions have increased the trend by roughly 20%, bringing full-year estimates to $18.28 per share.
Image Source: Zacks Investment Research
AN has chained together 12 consecutive quarterly EPS surprises, showcasing the company’s earnings consistency. In its most recent quarter, AutoNation beat estimates by $0.76 and had an EPS surprise of 15%, officially reporting quarterly EPS of $5.76. Notably, four of its last seven quarterly earnings reports beat estimates by at least 30%. The average surprise for the auto retailer over its last four quarters has been a remarkable 39%.
Image Source: Zacks Investment Research
AutoNation’s forward earnings multiple is currently 5.7X, much lower than its high of 16.7X, slightly higher than its low of 4.6X, and roughly 40% lower than its median of 10X over the same five-year timeframe. Relative to Zacks Automotive – Retail and Whole Sales Industry, the ratio is slightly lower than the industry’s 6.1X.
AutoNation checks all of the boxes for me when looking for undervalued stocks. Its strong relative performance, earnings growth, and favorable valuation are all factors contributing to its solid stance. Additionally, the company’s large product catalog creates multiple income streams, which further stands to benefit from its emerging digital solutions.
AN has an A Style Score for Value and is currently a Zacks Rank #1 (Strong Buy).
Nutrien
Nutrien (NTR - Free Report) is a leading integrated provider of crop inputs and services that supplies growers through its global retail network. The Canada-based company operates more than 2000 locations that span across the United States, Canada, Australia, and South America.
Shares of the company have rewarded investors nicely, up nearly 68% over the last year and enough to outperform the S&P 500 by a wide margin. Zacks Fertilizer sub-industry, which has also been notably strong over the last year, has lagged behind NTR with a return of approximately 48%. The graphic below shows the performance of the industry vs. NTR.
Image Source: Zacks Investment Research
Analysts have been rapidly revising their full-year earnings estimates for the current and next year. Over the last 60 days, eight upwards estimate revisions have come for FY22, while FY23 has seen three upwards revisions. The consensus estimate trend for the current year has increased roughly 13% to $11.76 per share and the trend for next year has seen a sizable 60% jump, forecasting yearly EPS of $8.71.
Image Source: Zacks Investment Research
Recent quarterly reports for the company have been promising, ringing in three earnings surprises out of its last four quarterly reports. In its most recent quarter, the fertilizer giant reported earnings of $2.47 per share, topping estimates by roughly 7%, and has posted an average earnings surprise of 60% over its last four quarters. Additionally, Nutrien has beat estimates in six of its last seven earnings reports.
Image Source: Zacks Investment Research
Even with strong price action, Nutrien still has solid valuation metrics. Nutrien’s forward earnings multiple is currently 8.4X, much lower than its high of 36.8X, slightly higher than its low of 6.9X, and lower than its median of 20.3X over the last five years. The company’s forward P/E ratio is roughly 13% lower than the industry’s 9.6X.
Nutrien’s strong return over the past year has been a sweet spot for investors, propelling its valuation. The company has recently focused on cost efficiency initiatives, its digital platform, and reduced long-term debt by $2.1 billion in 2021 as well. These factors are why I would believe NTR to be an attractive option to value-styled investors.
NTR has a B Style Score for Value and is currently a Zacks Rank #1 (Strong Buy).
Funko
Funko (FNKO - Free Report) is the last highly ranked stock with promising valuations that I will analyze. Funko is a pop culture consumer products company that offers figures, apparel, toys, vinyl, bags, wallets, and much more. The company distributes its products through specialty retailers, mass-market retailers, and e-commerce sites.
The company has lagged behind the S&P quite significantly over the last year, with shares losing 14% in value. Diving deeper into the recent negative price action, FNKO has declined nearly 48% off its all-time high share price of $26 last June. But when you compare the action-figure retailer’s performance to the Zacks Consumer Products – Discretionary industry, you’ll see that Funko’s decline over the last year has far outpaced the industry’s 46% plunge.
Image Source: Zacks Investment Research
Similar to AN and NTR, FNKO’s full-year earnings estimates have benefitted from recent analyst revisions over the last 60 days. Six upwards estimate revisions have come in for the current year, increasing the consensus estimate trend by 30% and raising full-year EPS estimates to $1.80. there have been two upwards estimate revisions for next year, increasing the earnings estimate to $2.07 per share.
Image Source: Zacks Investment Research
Quarterly reports have been a spectacle for FNKO. Dating back to March 2017 (17 reports in total), the company has yet to miss expectations. Its last four quarterly reports have been nothing short of impressive, stringing together an average earnings surprise of nearly 97%, with two triple-digit surprises. It reported EPS of $0.38 in its latest quarter, beating the $0.23 estimate by 65%.
FNKO’s recent downward trajectory has significantly lowered the company’s forward earnings multiple. Its current forward earnings multiple is 9.7X, much lower than the industry’s 20.9X average and the lowest value we’ve seen from Funko in recent years. The ratio was as high as 18X in January 2022 and as high as 46.3X in 2021.
Funko has been dragged down significantly over the last year, but I believe this has delivered a prosperous opportunity to buy shares of a company riding on the back of remarkable earnings and at a much lower forward earnings multiple. FNKO has outpaced its industry, recently received several estimate revisions for the current and next year, and seen its top-line increase by 275% since 2015. All of these factors lead me to the conclusion that Funko is worth taking a serious look at for value-style investors.
FNKO has an A Style Score for Value and is currently a Zacks Rank #1 (Strong Buy).
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3 Undervalued Stocks Flashing Buy Signals
The market has been spiraling and unwinding for the majority of 2022, wiping out last-year returns of many companies. This week, investors are laser-focused on this week’s Fed meeting.
The consensus among investors going into Wednesday’s meeting is that rates will be hiked by a quarter-point for the first time in years, directly affecting growth names that need to borrow more than others. In times like these, I think it is extremely beneficial that investors pivot to stocks that have strong earnings and rock-solid valuation metrics.
Let’s take a look at three companies currently trading at attractive valuation levels that would be good additions to your portfolio.
AutoNation
AutoNation (AN - Free Report) is the largest automotive retailer in the United States. The company offers vehicle maintenance and repair services, vehicle parts, extended service contracts, and other aftermarket services. Additionally, it arranges financing for vehicle purchases through third-party services.
AutoNation shares are up nearly 29% over the last year, easily outpacing the 1.2% return of Zacks Automotive – Retail and Whole Sales sub-industry. The same can be said regarding the S&P 500 over the last year as well, which returned approximately 6.7%, a much lower figure. The chart below compares the performance of the S&P 500 and AutoNation over the last year.
Image Source: Zacks Investment Research
The auto retailer’s future looks promising. For the current year, there have been six upward earnings revisions and the consensus estimate trend has increased by roughly 12.3% to $20.06 per share. Analyzing next year, two upwards estimate revisions have increased the trend by roughly 20%, bringing full-year estimates to $18.28 per share.
Image Source: Zacks Investment Research
AN has chained together 12 consecutive quarterly EPS surprises, showcasing the company’s earnings consistency. In its most recent quarter, AutoNation beat estimates by $0.76 and had an EPS surprise of 15%, officially reporting quarterly EPS of $5.76. Notably, four of its last seven quarterly earnings reports beat estimates by at least 30%. The average surprise for the auto retailer over its last four quarters has been a remarkable 39%.
Image Source: Zacks Investment Research
AutoNation’s forward earnings multiple is currently 5.7X, much lower than its high of 16.7X, slightly higher than its low of 4.6X, and roughly 40% lower than its median of 10X over the same five-year timeframe. Relative to Zacks Automotive – Retail and Whole Sales Industry, the ratio is slightly lower than the industry’s 6.1X.
AutoNation checks all of the boxes for me when looking for undervalued stocks. Its strong relative performance, earnings growth, and favorable valuation are all factors contributing to its solid stance. Additionally, the company’s large product catalog creates multiple income streams, which further stands to benefit from its emerging digital solutions.
AN has an A Style Score for Value and is currently a Zacks Rank #1 (Strong Buy).
Nutrien
Nutrien (NTR - Free Report) is a leading integrated provider of crop inputs and services that supplies growers through its global retail network. The Canada-based company operates more than 2000 locations that span across the United States, Canada, Australia, and South America.
Shares of the company have rewarded investors nicely, up nearly 68% over the last year and enough to outperform the S&P 500 by a wide margin. Zacks Fertilizer sub-industry, which has also been notably strong over the last year, has lagged behind NTR with a return of approximately 48%. The graphic below shows the performance of the industry vs. NTR.
Image Source: Zacks Investment Research
Analysts have been rapidly revising their full-year earnings estimates for the current and next year. Over the last 60 days, eight upwards estimate revisions have come for FY22, while FY23 has seen three upwards revisions. The consensus estimate trend for the current year has increased roughly 13% to $11.76 per share and the trend for next year has seen a sizable 60% jump, forecasting yearly EPS of $8.71.
Image Source: Zacks Investment Research
Recent quarterly reports for the company have been promising, ringing in three earnings surprises out of its last four quarterly reports. In its most recent quarter, the fertilizer giant reported earnings of $2.47 per share, topping estimates by roughly 7%, and has posted an average earnings surprise of 60% over its last four quarters. Additionally, Nutrien has beat estimates in six of its last seven earnings reports.
Image Source: Zacks Investment Research
Even with strong price action, Nutrien still has solid valuation metrics. Nutrien’s forward earnings multiple is currently 8.4X, much lower than its high of 36.8X, slightly higher than its low of 6.9X, and lower than its median of 20.3X over the last five years. The company’s forward P/E ratio is roughly 13% lower than the industry’s 9.6X.
Nutrien’s strong return over the past year has been a sweet spot for investors, propelling its valuation. The company has recently focused on cost efficiency initiatives, its digital platform, and reduced long-term debt by $2.1 billion in 2021 as well. These factors are why I would believe NTR to be an attractive option to value-styled investors.
NTR has a B Style Score for Value and is currently a Zacks Rank #1 (Strong Buy).
Funko
Funko (FNKO - Free Report) is the last highly ranked stock with promising valuations that I will analyze. Funko is a pop culture consumer products company that offers figures, apparel, toys, vinyl, bags, wallets, and much more. The company distributes its products through specialty retailers, mass-market retailers, and e-commerce sites.
The company has lagged behind the S&P quite significantly over the last year, with shares losing 14% in value. Diving deeper into the recent negative price action, FNKO has declined nearly 48% off its all-time high share price of $26 last June. But when you compare the action-figure retailer’s performance to the Zacks Consumer Products – Discretionary industry, you’ll see that Funko’s decline over the last year has far outpaced the industry’s 46% plunge.
Image Source: Zacks Investment Research
Similar to AN and NTR, FNKO’s full-year earnings estimates have benefitted from recent analyst revisions over the last 60 days. Six upwards estimate revisions have come in for the current year, increasing the consensus estimate trend by 30% and raising full-year EPS estimates to $1.80. there have been two upwards estimate revisions for next year, increasing the earnings estimate to $2.07 per share.
Image Source: Zacks Investment Research
Quarterly reports have been a spectacle for FNKO. Dating back to March 2017 (17 reports in total), the company has yet to miss expectations. Its last four quarterly reports have been nothing short of impressive, stringing together an average earnings surprise of nearly 97%, with two triple-digit surprises. It reported EPS of $0.38 in its latest quarter, beating the $0.23 estimate by 65%.
FNKO’s recent downward trajectory has significantly lowered the company’s forward earnings multiple. Its current forward earnings multiple is 9.7X, much lower than the industry’s 20.9X average and the lowest value we’ve seen from Funko in recent years. The ratio was as high as 18X in January 2022 and as high as 46.3X in 2021.
Funko has been dragged down significantly over the last year, but I believe this has delivered a prosperous opportunity to buy shares of a company riding on the back of remarkable earnings and at a much lower forward earnings multiple. FNKO has outpaced its industry, recently received several estimate revisions for the current and next year, and seen its top-line increase by 275% since 2015. All of these factors lead me to the conclusion that Funko is worth taking a serious look at for value-style investors.
FNKO has an A Style Score for Value and is currently a Zacks Rank #1 (Strong Buy).