3 Stocks Flying Under the Radar to Buy Right Now While the Fed's dovish comments have ignited a massive stock market rally, robust jobs growth entails that the central bank has more work to do when it comes to taming...
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While the Fed's dovish comments have ignited a massive stock market rally, robust jobs growth entails that the central bank has more work to do when it comes to taming inflation. As investors turn cautious, we believe it could be wise to scoop up fundamentally strong stocks Acuity Brands (AYI), Forrester Research (FORR), and Civeo Corp (CVEO), which are flying under the radar. Read more….
U.S. stocks relished one of their strongest months ever this January, lifting hopes for many that equity markets are making a turn for the green. With some success in easing inflation, the Federal Reserve recently made a small increase in interest rates by 25 basis points.
While Fed Chair Jerome Powell acknowledged that a "disinflationary process has started," he cautioned that it is "premature" to declare a win against inflation. As much as hopes are rising for a "soft landing," expectations are still laid out for a Fed-induced recession at some point this year.
With the recent jobs report showing almost startlingly strong unemployment, rate hikes remain a possibility in the near term, which could dampen investors' bullish sentiments. Amid ballooning job growth, Minneapolis Fed President Neel Kashkari said that the central bank has not made enough progress and expects the Fed funds rate to rise to 5.4%.
Market experts fear that continued rate hikes could push the economy into a recession. According to Goldman Sachs, the stock market rally is about to crumble, and investors should expect zero upsides for equities through the end of the year. The bank further added that later this year's debt ceiling deadline adds uncertainty to the path for U.S. stocks.
Amid the backdrop, it could be wise to invest in fundamentally strong stocks, Acuity Brands, Inc. (AYI), Forrester Research, Inc. (FORR), and Civeo Corporation (CVEO), that have been flying under the radar. These companies might provide an opportunity for investors to reap big gains.
Acuity Brands, Inc. (AYI)
AYI provides lighting and building management solutions in North America and internationally. The company operates through two segments: Acuity Brands Lighting and Lighting Controls (ABL) and Intelligent Spaces Group (ISG).
On January 26, 2023, AYI declared a quarterly dividend of $0.13 per share to its shareholders, payable on February 14, 2023. Its four-year average dividend yield is 0.36%, and its current dividend of $0.52 translates to a 0.27% yield on the current price level.
On November 29, 2022, AYI released its 2022 EarthLIGHT Report on its ESG accomplishments and new ESG targets. The company shared progress on its ongoing initiatives.
The company also announced its commitment to achieving Net Zero by 2040. It looks forward to working with the Science-Based Targets Initiative (SBTi) to establish new interim targets to reduce further its Scope 1, 2, and 3 carbon emissions.
AYI's net sales increased 7.8% year-over-year to $997.90 million in the first quarter that ended November 30, 2022. The company's non-GAAP net income increased 6.1% from the year-ago value to $107.50 million, while its adjusted operating profit grew 5.3% year-over-year to $140.10 million.
The company's non-GAAP EPS rose 15.4% from the prior-year quarter to $3.29. In addition, its adjusted EBITDA increased 4.1% year-over-year to $153 million.
In terms of forward non-GAAP P/E, AYI is trading at 13.9x, 21.5% lower than the industry average of 17.71x. The stock's forward EV/EBIT multiple of 10.71 is 31.5% lower than the industry average of 15.64. Also, its forward EV/EBITDA multiple of 9.85 compares to the industry average of 11.36.
Analysts expect AYI's EPS and revenue to increase 6.1% and 5.5% year-over-year to $2.73 and $958.98 million, respectively, in the fiscal second quarter (ending February 2023). The company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.
It has gained 15.1% over the past nine months to close the last trading session at $192.62.
AYI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has an A grade for Quality and a B for Value. Among the 60 stocks in the Home Improvement & Goods industry, it is ranked #2. Click here for the additional POWR Ratings of AYI (Growth, Momentum, Stability, and Sentiment).
Forrester Research, Inc. (FORR)
FORR is an independent research and advisory firm operating through the Research; Consulting; and Events segments. Its primary subscription research product offers clients access to its research designed to inform their strategic decision-making.
On January 23, 2023, FORR introduced the Partner Ecosystem Marketing service, the next generation of its Forrester Decisions for Channel Marketing service. The enhanced service is designed to help B2B organizations modernize, develop and optimize their existing partner programs.
Maria Chien, VP and research director at FORR, stated, "Currently, two-thirds of B2B channel and ecosystem leaders report that the orchestration of partner ecosystems is very important or essential to their organization. The Partner Ecosystem Marketing service within our Forrester Decisions portfolio will ensure that marketing leaders have access to the research and tools they need to fully capitalize on their partner ecosystems to drive business growth."
In the fiscal third quarter that ended September 30, 2022, FORR's net revenues increased 8.1% year-over-year to $127.68 million. Its adjusted income from operations grew 24.5% from the year-ago value to $15.81 million, while its adjusted net income increased 38% from the prior-year period to $10.90 million. In addition, FORR's non-GAAP EPS came in at $0.57, registering an increase of 39% year-over-year.
For the fiscal year 2022, FORR expects total revenues of approximately $535 million to $545 million and adjusted earnings per share of approximately $2.30 to $2.40. Moreover, its adjusted operating margin is expected to come in at 13%, compared to prior guidance of 12%.
In terms of forward non-GAAP PEG, FORR is trading at 0.95x, 44.2% lower than the industry average of 1.70x. The stock's forward EV/Sales multiple of 1.33 is 26% below the industry average of 1.80.
Analysts expect FORR's revenue for the quarter that ended December 31, 2022, to increase 3.7% year-over-year to $138.71 million. Its EPS for the first quarter (ending March 2023) is expected to increase 4.4% year-over-year to $0.47. It surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past three months, the stock has gained 8.5% to close the last trading session at $37.86.
FORR's POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value and Sentiment. Out of 105 stocks in the Financial Services (Enterprise) industry, it is ranked first. Click here to see FORR's ratings for Growth, Momentum, and Stability.
Civeo Corporation (CVEO)
CVEO provides hospitality services to the natural resource industry in Canada, Australia, and the United States. The company develops lodges and villages, and mobile accommodations. It offers food, housekeeping, maintenance services, laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security, logistics, and camp management services.
On January 31, 2023, the company announced a five-year contract with a leading metallurgical coal producer to provide rooms and hospitality services from its existing Coppabella, Moranbah, and Dysart accommodations facilities in Australia. This contract is expected to generate approximately A$337 million ($234.34 million) in total revenues over the five-year period.
On November 15, 2022, CVEO announced a five-year integrated services contract renewal to offer services at six villages in western Australia. This renewal reaffirms the strength of the company's customer relationships and high quality of hospitality services, along with expanding its scope in Australia.
In terms of forward EV/Sales, CVEO is trading at 1.08x, 39.9% lower than the industry average of 1.80x. The stock's forward EV/EBITDA multiple of 6.52 is 42.6% lower than the industry average of 11.36. Also, its forward Price/Sales multiple of 0.79 compares to the industry average of 1.42.
In the fiscal third quarter that ended September 30, 2022, CVEO's revenues increased 18.8% year-over-year to $184.23 million. Its operating income grew 79.4% from the year-ago value to $10.78 million. Its net income attributable to common shareholders improved significantly year-over-year to $5.23 million, while its adjusted EBITDA came in at $35.03 million, registering an increase of 33.8% year-over-year.
Analysts expect CVEO's revenue to increase 14.7% year-over-year to $681.72 million in the fiscal year 2022 (ended December 31, 2022). Its EPS is expected to increase by 15% per annum over the next five years. The company surpassed the consensus revenue estimates in each of the trailing four quarters.
Shares of CVEO have gained 59.4% over the past year and 30.3% over the past six months to close the last trading session at $35.17.
CVEO's strong prospects are apparent in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value, Stability, and Quality. In the B-rated Outsourcing - Business Services industry, it is ranked #3 of 41 stocks. Click here to see the additional POWR Ratings of CVEO (Growth and Momentum).
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AYI shares were trading at $191.92 per share on Thursday morning, up $0.30 (+0.16%). Year-to-date, AYI has gained 15.97%, versus a 8.11% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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