For Immediate Release
Chicago, IL – September 8, 2020 – Zacks Equity Research highlights Jeldwen Holding (JELD - Free Report) as the Bull of the Day and Ontrak (OTRK - Free Report) as the Bear of the Day. In addition, Zacks Equity Research provides analysis on Broadridge Financial Solutions, Inc. (BR - Free Report) , Genpact Limited (G - Free Report) and Conduent Inc. (CNDT - Free Report) .
Here is a synopsis of all five stocks:
Jeldwen Holding is a Zacks Rank #1 (Strong Buy) and it sports a Value Style Score of A and a Growth Style Score of B. This building products company is seeing the positive impact of low rates and strong demand for new homes. Let's take a look at the numbers in the Bull Of The Day.
JELD-WEN Holding, Inc. designs, produces and distributes interior and exterior doors, wood, vinyl and aluminum windows and related products for new construction and repair and remodeling of residential homes and non-residential buildings. The company's brand portfolio includes JELD-WEN (R), Swedoor (R), DANA (R), Corinthian (R), Stegbar (R) and Trend (R). It operates primarily in North America, Europe and Australia. JELD-WEN Holding, Inc. is headquartered in Charlotte, North Carolina.
I see an ok earnings history with two beats and two misses in the last four quarters.
Importantly, the most recent quarter was a huge beat and that has helped push estimates higher for this stock.
The most recent quarter saw the company report EPS of $0.47 when $0.18 was expected. This translates to a beat of $0.29 or a positive earnings surprise of 161%.
Estimates spiked following the solid beat and that is the main reason why this stock moved to a Zacks Rank #1 (Strong Buy).
I see this quarter moving to $0.41 from $0.23. Next quarter moved from $0.19 to $0.31 as well. Both very solid moves.
The full year numbers are what really matters to the Zacks Rank, I see the 2020 number moving from $0.72 to $1.34.
Next year also saw a huge increase to $1.06 from $1.67.
JELD has a great valuation, with a 15x forward earnings multiple and a price to book multiple of 2.46x. These are levels that will have value investors looking for a good time to make an entry. I see operating margins have held relatively still, but net margins have seen a slight decline over the last few quarters.
Ontrak is a Zacks Rank #5 (Strong Sell) and today the stock finds itself as the Bear of the Day. Let's take a look at why a stock that recently beat earnings and has a great chart could have the lowest Rank.
Ontrak, Inc. is an AI and telehealth enabled, virtualized outpatient healthcare treatment company. The company's Predict-Recommend-Engage (TM) platform predicts people whose chronic disease will improve with behavior change, and recommends effective care pathways. Ontrak, Inc., formerly known as Catasys Inc., is based in the United States.
Normally a stock with a Zacks Rank #5 (Strong Sell) will have an earnings miss in the most recent quarter. That is not the case here with OTRK posting a beat, but that beat was preceded by three straight misses.
THe most recent quarter saw the company post a loss of 24 cents when a loss of 28 cents was expected. That four-cent beat translates into a positive earnings surprise of 14%.
The Zacks Rank is focused on the movement of earnings estimates. I see the estimates for the current quarter falling 2 cents. That isn't enough to send the stock to the lowest Zacks Rank but it doesn't help.
The full year numbers have slipped from a loss of 80 cents to a loss of 87 cents.
Keep in mind the recent quarter was beat of 4 cents, so this could be a case of pulling some earnings forward.
OTRK is running a loss so there is no PE or forward PE to lean on. What I do see is a lot of growth, with 124% topline growth in the most recent quarter. A price to sales multiple of 23x is awfully high, but we know that growth investors are willing to pay big multiples for solid growth and this name has it.
3 Stocks from the Promising Outsourcing Space to Watch Out For
Operational efficiency, reduced expenses in the wake of the coronavirus crisis-induced work-from-home wave, and increased adoption of cloud computing and other emerging technologies bode well for the Zacks Outsourcing industry. These drive competitive advantage, and increase innovation and speed-to-market.
Broadridge Financial Solutions, Inc., Genpact Limited and Conduent Inc. are some stocks, which are likely to gain from the abovementioned industry trends. However, rising data security issues, thanks to increased dependency on technology, are concerns for the industry.
Outsourcing is the practice of transferring control of certain operations, services or processes, previously done by a company’s internal staff or resources, to a third party.
The Zacks Outsourcing industry comprises companies that are engaged in providing information technology, payroll, human resource, retirement and insurance services, business management solutions and business process outsourcing to small and mid-sized companies in the United States and abroad.
4 Trends Shaping the Future of Outsourcing Industry
A Healthy Demand Environment: Increasing demand for expertise in improving efficiency and reducing costs has benefited the industry over the past several years. The industry has witnessed growth in revenues, income and cash flow over the past few years, enabling most players to pursue acquisitions and other investments and pay out stable dividends.
Benefits from the Remote Working Model: The industry has witnessed a shift in its operating model with an increase in the number of remote workers in the wake of the coronavirus crisis-induced work-from-home wave. Despite dealing with all types of operational challenges (related to working from home) such as availability of laptops, Internet connectivity and data-security issues, remote working continues to be a driving force.
Also, it is leading to cost savings for many firms by bringing down their spending on real estate. Adoption of remote working should also alter the offshore-onshore delivery capabilities for industry players. This is anticipated to create a hybrid-work-culture (a hybrid model of working from office and home) in the days ahead, which should enhance the talent pool of the industry.
Increased Adoption of Technologies:Most of the industry participants are also considering emerging technologies such as cloud computing to drive competitive advantage, increase innovation, improve speed-to-market and drive performance within the industry. Wider application of artificial intelligence (AI) is expected to be the biggest change due to the pandemic. Adoption of AI should lower complications and simplify operations. This should aid the industry.
Notably, industry players are in the process of modernizing their traditional legacy-oriented business processes in order to keep themselves flexible amid any kind of operating environment.
Rising Security Concerns and Remedies: Coronavirus-led increased dependency on technology has led to growing cases of hacking, identity theft and malicious payload deliveries. With companies shifting to off-location operations and work-from-home models, remote infrastructure vulnerabilities and security gaps are being exploited to secure unauthorized access to proprietary systems and data.
As a preventive measure to enhance data security and ensure cyber-resilience, increased implementation of secure access technologies, such as VPNs, two-factor authentication and other ID and access-management controls for home workers, as well as increased monitoring and threat-detection tools are being used.
Outsourced service providers are also updating organizational policies (including Bring Your Own Device and work from home policies) and data breach protocols in order to reduce security risk. Adequate training of employees about emerging threats and data security issues is also being prioritized by several companies.
Zacks Industry Rank Indicates Encouraging Prospects
The Zacks Outsourcing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #33. This rank places it in the top 13% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates continued outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that investors can buy or retain given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry Underperforms Sector and S&P 500
The Zacks Outsourcing Services industry has underperformed the broader Zacks Business Services sector as well as the Zacks S&P 500 composite over the past year.
The industry has declined 13.1% over this period against 0.5% growth of the broader sector and 15.7% increase of the Zacks S&P 500 composite.
Industry’s Current Valuation
On the basis of forward 12-month price-to-earnings (P/E), which is commonly used for valuing outsourcing stocks, the industry is currently trading at 21.44X compared with the S&P 500’s 22.84X and the sector’s 30.08X.
Over the past five years, the industry has traded as high as 23.66X, as low as 17.32X and at the median of 22.14X.
3 Outsourcing Stocks to Keep a Close Eye On
We are presenting three stocks that carry a Zacks Rank #1 (Strong Buy) or 3 (Hold). These stocks are well positioned to grow in the near term. You can see the complete list of today’s Zacks #1 Rank stocks here.
Conduent Incorporated:This Zacks Rank #1 New Jersey-based company provides business process services with capabilities in transaction-intensive processing, analytics, and automation in the United States, Europe, and internationally. The company has been enjoying COVID-19- related benefits in its government business. Improvement in operational and technology performance and reduction in expenses have been aiding the company’s bottom line. Efforts to strengthen client relationships have resulted in improved client retention.
The Zacks Consensus Estimate for current-year EPS has improved more than 100% in the past 60 days. The stock has gained 52.7% over the past six months.
Broadridge Financial Solutions, Inc.:This Zacks Rank #3 New York-based company provides investor communications and technology-driven solutions for the financial services industry worldwide. Rising demand for technology solutions has enabled the company to increase investments in digital, AI, cloud and blockchain particularly via acquisitions. This is expected to supplement the company’s growth amid coronavirus-induced dependency on technology.
Further, the company has a strong business model, backed by higher recurring fee revenues. It has supplemented internal growth with strategic acquisitions and has diversified products and services to support top-line growth. The company is executing well on its growth strategy in governance, capital markets and wealth management.
The Zacks Consensus Estimate for current-year EPS has improved 2.3% in the past 60 days. The stock has gained 47.9% over the past six months.
Genpact Limited:This Zacks Rank #3 Bermuda-based company provides business process outsourcing and information technology (IT) services North and Latin America, India, rest of Asia, and Europe. Genpact enjoys a competitive position in the BPO services market based on domain expertise in business analytics, digital and consulting.
Acquisitions have been helping in expanding product portfolio and gaining new domain expertise. Artificial Intelligence offers ample growth opportunities amid COVID 19-induced dependency on technology. Consistency in rewarding shareholders through dividend payments and share repurchases boost investor confidence and positively impact earnings per share.
The Zacks Consensus Estimate for current-year EPS has improved 11.4% in the past 60 days. The stock has gained 9% over the past six months.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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