Today, June 29, 2022, Dow Jones is trading at ~30,969, the S&P 500 at ~3,809, and Nasdaq at ~11,133. The market keeps signaling its uncertainty, driving down prices, and the keen investor asks “what companies should I invest in right now”?
Based on strong fundamentals and bullish forecasts, we found 5 cheap but good stocks that you might want to check.
Let’s have a look…
1. Vista Outdoor Inc (NYSE: VSTO)
Vista Outdoor Inc, founded in 2015 and headquartered in Anoka, Minnesota, is a US-based designer, developer, and manufacturer of outdoor sports and recreation products.
The company operates through two segments: Shooting sports (which contributes the largest proportion of revenue) and Outdoor products.
The Shooting Sports segment includes long guns, ammunition, and related equipment under brands such as Blackhawk, Federal Premium, and Hoppe’s.
Now, the Outdoor products segment includes hunting and archery accessories, golf products, eyewear, hydration products, and stand-up paddle boards under brands such as CamelBak and Bushnell.
Based on the 6 analysts’ 12-month median price target of $55 and the stock’s trading price, VSTO now has an 86.06% upside. The highest price target is $65 which represents a 119.9% upside and the lowest is $51 which represents a 72.53% upside.
All of the price targets seem a bit too bullish, but they’re all reasonable predictions in the mid-term, if not in the short-term (12 months).
The valuation of this company is phenomenally low, both in absolute and relative terms. Its stock price is trading at 3.7 times its EPS and 1.5 times its book value.
Relatively to the performance, it signals a great opportunity. The company generated a 42% return on its equity and grew revenue and EPS by 36.8% and 80.2% on a YoY basis, respectively.
Vista Outdoor is also highly liquid (current ratio: 2.8x, interest coverage: 25.6x) and has a conservative capital structure (D/E: 1.1x). If you’re looking to hold the stock for the long term and the company can maintain such liquidity and debt levels, you’ll have no problems.
Source: VSTO Annual Report
2. Potlatchdeltic Corp (NASDAQ: PCH)
PotlatchDeltic, founded in 1903 and headquartered in Spokane, WA, is a REIT that owns and manages forestland in Arkansas, Mississippi, Idaho, Alabama, and Minnesota.
PotlatchDeltic operates through three segments:
- TimberlandsThis segment covers the planting/harvesting of trees and the construction/maintenance of roads.
- Wood productsThis segment manufactures and distributes plywood, and lumber, among other wood products.
- Real EstateThis segment covers the revenue generated from the timberlands owned by the company, along with the residential and commercial properties.
The Timberlands and the Wood products segments generate most of the company’s revenue.
Based on the 6 analysts’ 12-month median price target of $60 and the stock’s trading price, PCH now has a 35.56% upside. The highest price target is $70 which represents a 58.15% upside and the lowest is $55 which represents a 24.26% upside.
Based on the company’s fundamentals, both the lowest and median price targets seem reasonable. The highest is unlikely to be realized in the short-term but definitely possible in the mid-term.
PotlatchDeltic had a great run last year. It generated a 27% return on its equity and grew revenue and EPS by 28.5% and 153.4% on a YoY basis, respectively.
What’s interesting is that the market hasn’t adjusted the price of the stock appropriately. It’s currently trading at 7 times its EPS and 2 times its book value.
Further, the firm has very strong liquidity (current ratio: 3.3x, interest coverage: 18.8x) and low debt (D/E: 0.6x). It’s obviously very far from insolvency and could be a great long-term pick.
Source: PCH Annual Report
3. Werner Enterprises Inc (NASDAQ: WERN)
Werner Enterprises Inc, founded in 1956 and headquartered in Omaha, Nebraska, is one of the top five full-truckload carriers (by revenue generated), with more than 7,800 tractors.
It operates its business through 2 segments: TTS and Werner Logistics.
Also, the company derives about 80% of its top line from full-truckload shipping services.
Based on the 17 analysts’ 12-month median price target of $46 and the stock’s trading price, WERN now has a 21.66% upside. The highest price target is $73 which represents a 93.07% upside and the lowest is $35 which represents a 7.43% downside.
The median price target is the most reasonable prediction here, albeit a bit conservative. The highest is achievable, but not in the short term. Last, the downside represented by the lowest price target is not likely.
This company’s performance was more than decent last year. Its ROE was 19.7% and its YoY revenue and EPS growth were 15.2% and 26.5%, respectively.
This looks even better in the light of valuation. The stock is not trading at only 9.9 times its EPS and 1.9 times its book value.
Further, the firm has too little debt (D/E: 0.2x) and exceptionally strong liquidity (current ratio: 2.3x, interest coverage: 69.9x).
Source: WERN Annual Report
4. Hub Group Inc (NASDAQ: HUBG)
Hub Group, founded in 1971 and headquartered in Oak Brook, Illinois, is one of the largest asset-light providers of rail intermodal service. The company offers transportation and logistics management services in North America
Hub Group’s transportation services include truckload, less-than-truckload, intermodal, flatbed, dedicated and regional trucking, temperature-controlled, final mile, small parcel, railcar, and international transportation.
Its logistics services include transportation management, warehousing and fulfillment, freight consolidation, full outsource logistics solution, parcel and international, and final mile delivery services.
Based on the 15 analysts’ 12-month median price target of $92 and the stock’s trading price, HUBG now has a 33.29% upside. The highest price target is $111 which represents a 60.82% upside and the lowest is $73 which represents a 5.76% upside.
The median price target is a very reasonable estimate, considering the company’s recent performance and its stock’s trading price. The highest is too bullish but possible in the mid term, while the lowest is unreasonable.
The company’s recent performance was decent. First, it grew revenue and EPS by 21% and 131% on a YoY basis, respectively. It also generated a 12.8% return on its equity.
But the current price of the stock sure makes the deal. It is now trading at 13.6 times its EPS and 1.7 times its book value.
Further, the company has a D/E ratio of 1.8x which makes it conservatively financed. And last, its liquidity looks adequate right now. Its current assets were last reported as 1.3 times its current liabilities. Also, it generated an EBIT figure that was 32.6 times its interest expense.
5. American Eagle Outfitters Inc (NYSE: AEO)
American Eagle Outfitters Inc, founded in 1977 and headquartered in Pittsburgh, Pennsylvania, is an apparel and accessory retailer operating in the U.S., Canada, Mexico, and Hong Kong.
The company leases all of its store premises, certain IT and office equipment, some of its office space, and regional distribution facilities. It also has an online business, offering worldwide shipping.
It does business through two segments: American Eagle and Aerie.
Most of the company’s sales come from its primary brand, American Eagle, which offers apparel and accessories for both men and women.
Based on the 11 analysts’ 12-month median price target of $15 and the stock’s trading price, AEO now has a 27.11% upside. The highest price target is $15 which represents a 131.7% upside and the lowest is $8 which represents a 32.20% downside.
While the highest price target seems too bullish right now, the median price target nicely reflects the value of the stock. The downside is unreasonably bearish, considering the fundamentals.
The company’s performance last year was pretty good. It generated a 29.5% return on its equity and grew its revenue by 33.3% on a YoY basis.
Also, the stock’s price is trading at just 5.8 times its EPS and 1.7 times its book value. We find it unlikely that the value won’t be appreciated by the market for long.
Last, the AEO is highly liquid (current ratio: 1.6x, interest coverage: 17x) and not overleveraged (D/E: 1.6x).
Source: AEO Annual Report
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