The stock market has remained under pressure lately due to concerns over surging inflation and the Fed’s aggressive monetary tightening. Investors worry that the Federal Reserve’s tighter monetary policy to combat the multi-decade high inflation may lead to an economic contraction. Although these concerns are not expected to subside soon, it could be wise to buy quality stocks amid this downtrend.
Stocks possessing strong profitability and steady revenue and earnings streams are considered high-quality stocks. These stocks usually remain resilient regardless of economic and market conditions.
High-quality stocks Chico's FAS, Inc. (CHS), MarineMax, Inc. (HZO), and The ODP Corporation (ODP) are currently trading at significant discounts to their peers. Since these stocks are well-positioned to rebound soon, it could be wise to invest in them now.
Chico's FAS, Inc. (CHS)
CHS is an omnichannel specialty retailer of women’s private branded clothing, intimates, and complementary accessories. The company sells its products through retail stores, catalogs, and websites. Its segments include Chico’s, White House Black Market (WHBM), and Soma.
On March 22, 2022, CHS announced the launch of new mobile apps across its brands to unify customers’ omnichannel shopping. CHS’ VP of Digital Commerce, Stacey Blicker, said, “Launching these new mobile apps is another step forward in our work to leverage premier digital capabilities to drive loyalty and sales conversion.”
CHS’ net sales increased 39.4% year-over-year to $540.91 million for the first quarter ended April 30, 2022. The company’s net income came in at $34.93 million, compared to a net loss of $8.92 million in the year-ago period. Also, its EPS came in at $0.28, compared to a loss per share of $0.08 in the year-ago period.
In terms of forward non-GAAP P/E and P/S, CHS’ 7.54x and 0.31x compare to the industry averages of 11.02x and 0.81x, respectively. Moreover, its forward EV/EBIT of 9.63x is 16% lower than the industry average of 11.30x.
Analysts expect CHS’ EPS and revenue for fiscal 2023 to increase 91.9% and 18.7% year-over-year to $0.71 and $2.15 billion, respectively. It surpassed Street EPS estimates in each of the trailing four quarters. The stock has declined 2.2% year-to-date to close the last trading session at $5.26.
CHS’ POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and Quality and a B grade for Growth. It is ranked #5 out of 68 stocks in the B-rated Fashion & Luxury industry. Click here to see the other ratings of CHS for Momentum, Stability, and Sentiment.
MarineMax, Inc. (HZO)
HZO is a recreational boat and yacht retailer. The company is engaged in the retail sale, brokerage, and service of new and used boats, motors, trailers, marine parts, and accessories and offers slip and storage accommodations in certain locations. It also arranges related boat financing, insurance, and extended service contracts.
On April 12, 2022, HZO announced that it had invested in a 100% online boat and marine retailer named Boatzon. HZO’s CEO and President W. Brett McGill said, “We are excited to invest in Boatzon. The partnership aligns well with our high-margin business growth and diversification goals. It enhances our industry-leading innovative technologies and digital tools.”
For the fiscal second quarter ended March 31, 2022, HZO’s revenue increased 16.6% year-over-year to $610.10 million. The company’s gross profit increased 30.9% year-over-year to $205.31 million. Its net income increased 37.4% year-over-year to $53.50 million. Also, its EPS came in at $2.37, representing an increase of 40.2% year-over-year.
In terms of forward P/E and EV/EBITDA, HZO’s 4.53x and 3.07x compare to the industry averages of 11.02x and 8.14x, respectively. Moreover, its forward EV/EBIT of 3.28x is 70.9% lower than the industry average of 11.30x.
For fiscal 2022, HZO’s EPS is expected to increase 21.1% year-over-year to $8.21. Its revenue for the quarter ending September 30, 2022, is expected to increase 20.1% year-over-year to $555.36 million. It surpassed consensus EPS estimates in each of the trailing four quarters. The stock has lost 37% year-to-date to close the last trading session at $37.17.
HZO’s strong fundamentals are reflected in its POWR Ratings. The stock's overall B rating translates to a Buy in our proprietary rating system.
It has an A grade for Value and Quality and a B grade for Growth. Within the Athletics & Recreation industry, it is ranked first out of 39 stocks. To see the other ratings of HZO for Momentum, Stability, and Sentiment, click here.
The ODP Corporation (ODP)
ODP provides business services, supplies, products, and digital workplace technology solutions for small, medium, and enterprise businesses. The company operates in two divisions, Business Solutions, and Retail.
ODP’s sales increased 0.1% year-over-year to $2.17 billion for the first quarter ended March 26, 2022. The company’s operating income increased 10.1% year-over-year to $76 million. Also, its adjusted EPS came in at $1.27, representing an increase of 4% year-over-year.
In terms of forward non-GAAP P/E and EV/S, ODP’s 7.16x and 0.22x compare to the industry averages of 11.10x and 1.08x, respectively. Moreover, its forward EV/EBITDA of 4.31x is 48% lower than the industry average of 8.30x.
Analysts expect its EPS for the quarter ending December 31, 2022, to increase 5.4% year-over-year to $0.75. It surpassed Street EPS estimates in three of the trailing four quarters. The stock has lost 22.3% year-to-date to close the last trading session at $30.51.
ODP’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Value and Quality and a B grade for Growth. It is ranked #3 out of 46 stocks in the Specialty Retailers industry. Click here to see the other ratings of Momentum, Stability, and Sentiment.
CHS shares fell $0.17 (-3.23%) in premarket trading Thursday. Year-to-date, CHS has declined -5.39%, versus a -20.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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