Stocks To Buy Now May 3rd, 2022

Our first pick is Mueller Industries (NYSE: MLI), an American manufacturer of copper, aluminum, brass, and plastic products.

The company derives the largest portion of its revenue from its piping systems business which involves producing tubes, rods, valves, fittings, etc.

Though Mueller Industries makes most of its sales in the US, it operates worldwide.

Forecast

Based on one analyst’s 12-month $100 price target, MLI has an 87.13% upside right now (currently trading at $53.25 per share).

This is an impressively bullish outlook, but not without good reason. Let’s dive into the fundamentals…

Fundamentals

MLI proved to be an outstanding growth business last year. Its return on equity was 39%, while its revenue and earnings per share growth (Y/Y) were 57% and 234%, respectively.

With a current ratio of 2.6 and an 85x interest coverage, it also seemed to have very strong liquidity.

On top of that, the company seems to have low debt relative to its equity (D/E: 0.37), making it creditworthy enough.

Still, it’s very surprising that with such good performance and financial stability MLI is that cheap. It has a P/E ratio of 6.4 and a P/B of 2.4. So, even if the recent performance turns out to be unstable, you can count on the inexpensiveness for a still satisfying return.

Source: MLI 10-K

Stride Inc. (NYSE: LRN) is a for-profit online educational program provider that operates in the USA. 

The company mainly offers alternative curriculum programs to school districts to replace traditional on-campus schooling, but also operates virtual charter schools that are state-funded.

Forecast

Based on 4 analysts, the stock has an averagely estimated 27.55% upside for the next 12 months as the median price target is $50 per share (currently trading at $39.20). The highest price target is at $65 per share and the lowest at $39.

We think that with a market capitalization of $1.7B and the realization of the above forecasts, Stride is well on its way to entering the mid-cap club soon and receiving even more attention from Wall Street. Which is likely to contribute to a further increase in its market cap.

Fundamentals

First, the company’s profitability… It has enjoyed a great performance with an 8.9% return on equity, year-over-year revenue growth of 47.6%, and 185% year-over-year earnings per share growth.

This may be enough to justify the analyst forecast price targets, but what if you’re looking for long-term stability?

With a current ratio of 2.8 and a 6.1x interest coverage, Stride is adequately liquid and isn’t likely to experience any shortage of cash any time soon.

We were also happy to see a conservative capital structure reflected in the company’s debt to equity ratio of 0.96. That leaves enough room for debt financing if capital is needed in the future and decreases the chance of stock dilution.

Lastly, the risk would be relatively low considering the current stock’s price trading at 22.9 times the diluted earnings per share and 2.1 times the book value.

Source: LRN 10-K

Berry Global Group Inc. (NYSE: BERY) is a global market leader in the plastic packaging products business, which involves manufacturing and selling products like apparel bags, bulk bags, plastic bottles, applicators, etc.

The company’s raw material is plastic resin which can be obtained from a variety of global suppliers.

Forecast

Based on 17 analysts’ average 12-month price target of $79 per share for BERY and its current price of $56.31, the stock has a 40.29% upside. The highest price target is $88 and the lowest $65.

Considering BERY’s market prominence, attractive business model, and valuation right now, we think that this forecast is reasonable. But we should let the numbers speak too…

Fundamentals

When it comes to its performance, BERY had a return on equity of 23%, an 18.2% revenue and 28% EPS YoY growth.

As for liquidity, its last reported current assets were 1.6 times larger than its current liabilities and its EBIT was 3.7 times its interest expense. We think that this level of liquidity can make up for the company’s level of debt (D/E: 4.6).

The opportunity lies in large part in the current trading price, though. A P/E ratio of 10.6 and P/B of 2.4 don’t fit a market leader with such growth potential. So, we think that a correction is imminent here.

Source: BERY 10-K

Ciena Corp. (NYSE:CIEN) is a telecommunications equipment company, providing network hardware and software, along with services, to support the management of video/voice traffic on networks.

The company’s clients are in the communication service, web-scale, and cable operators industries, among others, from all around the world.

Ciena operates in the United States, Canada, the Caribbean, Latin America, Europe, the Middle East, Africa, the Asia Pacific, Japan, and India.

Forecast

Based on 16 analysts’ 12-month $80 per share average price target and CIEN’s current price ($55.57), the stock has a 44.46% upside. The lowest price target is $53 and the highest $96.

We are a bit skeptical if this median price target is going to be reached in 12 months, but the company’s financials look solid enough to suggest some great returns in the future…

Fundamentals

Ciena’s performance has been pretty decent recently. Its return on equity was 16.5%, revenue remained stable with a 2.5% growth (Y/Y), and its EPS grew by 37.5%, year-over-year.

Now, with a current ratio of 3.5 and a 16x interest coverage, the company looks to have enough leeway to weather a bad year. Its capital structure is also so conservative (D/E: 0.6) as to suggest that bankruptcy won’t be a likely scenario under any circumstances any time soon.

As for value, a P/E ratio of 17.4 and a P/B of 2.8 make us think Ciena is under-appreciated by the market right now.

Source: CIEN 10-K