Are These Stocks Worth the Earnings Hype?

Investors look forward to a slew of economic data, including the jobs report due this Friday and the CPI report due next week. Also, several companies are scheduled to release their earnings reports. Quarterly reports of Nurix Therapeutics, Inc. (NRIX), Genius Brands International, Inc. (GNUS), and ClearSign Technologies Corporation (CLIR) are highly anticipated, but are these stocks worth the hype? Let’s find out in this article.

Despite the recent turmoil in the financial sector, the Federal Reserve raised interest rates by a quarter-point last month. The Fed has increased benchmark interest rates nine times since March 2022, taking the federal funds rates to a 4.75%-5% range. Fed Chairman Jerome Powell has hinted that rate hikes are nearly at an end.

However, since inflation was at 6% last count, Powell insists that the central bank is still committed to achieving its target of 2%. At his post-meeting news conference, he suggested, “In assessing the need for further hikes, we’ll be focused on incoming data and the evolving outlook, and in particular on our assessment of the actual and expected effects of credit tightening.”

Analysts and investors are looking forward to a slew of economic data and corporate earnings to see more evidence of slowing growth to reinforce hopes for a less-hawkish Fed and soft landing required for the stock market to stay resilient. Yesterday, the Bureau of Labor Statistics reported that job openings tumbled below 10 million in February for the first time in nearly two years.

A significant decline in job openings supports the argument that the Fed could take a pass on a rate increase at its next meeting in May. Now, attention turns to the March jobs report due this Friday. According to data from Trading Economics, the economy is expected to add 238,000 jobs in March, and the unemployment rate is set to hold steady at 3.6%.

On the other hand, if economic data came in stronger than expected, the Fed will likely approve another aggressive rate hike.

In addition to a series of economic data, corporate earnings could help the stock market to head higher or retest its 2022 lows. Amid a challenging macro environment, analysts predict that S&P 500 earnings per share will plunge 4.6% year-over-year in the first quarter of 2023, according to Refinitiv.

There seems to be significant hype surrounding the upcoming earnings reports of stocks NRIX, GNUS, and CLIR. NRIX and CLIR will release their earnings reports tomorrow, and GNUS has recently provided a glimpse into its 2022 earnings, which makes the whole report anticipated.

Let’s take a closer look at the fundamentals of these featured stocks:

Nurix Therapeutics, Inc. (NRIX)

NRIX is a clinical-stage biopharmaceutical company that focuses on the discovery, development, and commercialization of small molecule and cell therapies based on the modulation of cellular protein levels for treating cancer and other challenging diseases.

NRIX’s trailing-12-month ROCE, ROCE, and ROTA of negative 55.84%, 34.25%, and 43.28% compare to the industry averages of negative 40.21%, 21.80%, and 31.61%, respectively. Also, the stock’s trailing-12-month asset turnover ratio of 0.09x is 75.25% lower than the 0.35x industry average.

For the fourth quarter that ended November 30, 2022, NRIX’s collaboration revenue declined 8.3% year-over-year to $6.78 million. Its total operating expenses increased 22.3% from the year-ago value to $55.47 million. The company’s loss from operations widened 28.3% year-over-year to $48.69 million. Also, its net loss worsened by 23.9% year-over-year to $46.72 million.

Furthermore, the company’s net loss per share widened by 2.4% from the prior-year period to $0.87. As of November 30, 2022, its cash and cash equivalents were $64.47 million, compared to $80.51 million as of November 30, 2021. In addition, its current liabilities stood at $70.66 million, compared to $66.26 million as of November 30, 2021.

The consensus revenue estimate of $11.04 million for the second quarter (ending May 2023) indicates a 3.4% decline year-over-year. Also, the company is expected to report a loss per share of $0.90 for the ongoing quarter. Moreover, NRIX missed the consensus revenue and EPS estimates in three of the trailing four quarters, which is disappointing.

Furthermore, analysts expect NRIX to report a loss per share of $3.53 and $3.51 for the fiscal years 2023 and 2024, respectively. The stock has declined 34.7% over the past month and 40% over the past year to close the last trading session at $8.70.

NRIX’s weak fundamentals are reflected in its POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

NRIX has a D grade for Stability, Growth, Momentum, and Sentiment. The stock is ranked #221 out of 384 stocks in the F-rated Biotech industry. 

In addition to the POWR Ratings grades I’ve just highlighted, you can see the NRIX’s rating for Value and Quality here.

Genius Brands International, Inc. (GNUS)

GNUS is a content and brand management company. It creates and licenses multimedia content for children globally. The company provides various animated series, including Rainbow Rangers, Llama Llama, Warren Buffet's Secret Millionaire's Club, Superhero Kindergarten, and Baby Genius. It serves broadcasters, consumer product licensees, wholesalers, and retailers.

On February 10, 2023, GNUS’ board of directors approved the 1-for-10 reverse stock split in accordance with Nevada law and is intended to increase the per share trading price of the company’s common stock to satisfy the $1 minimum bid price requirement for continued listing on the Nasdaq Capital Market.

Reverse stock splits are generally viewed as a negative development as they indicate that a company’s share price has declined significantly, putting it at risk of being delisted.

GNUS’ trailing-12-month gross profit margin of 33.46% is 33.4% lower than the industry average of 50.22%. Likewise, the stock’s trailing-12-month EBITDA and net income margins of negative 75.30% and 136.29% are significantly lower than the industry averages of 18.02% and 3.38%, respectively.

For the third quarter that ended September 30, 2022, GNUS’ operating expenses increased 114.6% year-over-year to $25.12 million. The company reported a loss from operations of $5.44 million. Its loss from continuing operations came in at $4.76 million. In addition, net loss attributable to GNUS and net loss per share widened 21.2% and 33.3% year-over-year to $11.22 million and $0.04, respectively.

Over the past year, shares of GNUS have declined 72% to close the last trading session at $2.91. Also, the stock has slumped 55.7% over the past six months.

GNUS’ POWR Ratings reflect this weak outlook. It has an overall rating of F, translating to a Strong Sell in our proprietary rating system.

The stock has an F grade for Quality and Stability. It has a D grade for Value and Momentum. Within the F-rated Entertainment-Media Producers, GNUS is ranked #14 out of 15 stocks. 

Click here to see additional POWR Ratings of GNUS (Sentiment and Growth).

ClearSign Technologies Corporation (CLIR)

CLIR develops products and technologies to enhance operational performance, energy efficiency, emission reduction, and overall cost-effectiveness of industrial and commercial systems in the United States and the People’s Republic of China. The company serves energy, commercial and industrial boiler, chemical, and petrochemical industries.

CLIR’s trailing-12-month gross profit margin of 33.33% is 33.8% lower than the industry average of 50.35%. Also, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 56.06%, 33.68%, and 47.77% compare to the respective industry averages of 2.65%, 2.06%, and 0.67%.

CLIR reported a loss from operations of $1.44 million in the third quarter that ended September 30, 2022. Its net loss attributable to common stockholders and net loss per share came in at $1.31 million and $0.03, respectively. Also, as of September 30, 2022, the company’s cash and cash equivalents were $5.88 million, compared to $7.61 million as of December 31, 2022.

The company is expected to report a loss per share of $0.13 and $0.09 for the fiscal years 2023 and 2024, respectively. Shares of CLIR have plunged 12.9% over the past six months and 54.1% over the past year to close the last trading session at $0.82.

CLIR’s weak prospects are reflected in its POWR Ratings. The stock has an overall rating of D, which equates to Sell in our proprietary rating system.

CLIR has an F grade for Value and a D for Quality. Within the Industrial-Services industry, the stock is ranked #81 of 84 stocks. To see additional POWR Ratings of CLIR for Growth, Stability, Sentiment, and Momentum, click here.

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NRIX shares were trading at $8.74 per share on Wednesday morning, up $0.04 (+0.46%). Year-to-date, NRIX has declined -20.40%, versus a 7.01% rise in the benchmark S&P 500 index during the same period.

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.

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