The Federal Reserve’s aggressive interest rate hikes to ease the inflationary pressure have increased the odds of the economy slipping into a recession. Massive market volatility and sell-offs have recently lowered the valuations of many quality stocks.
Although many analysts expect inflation to moderate in the near term, investing in relatively stable and fundamentally sound stocks could be a wise decision for dodging short-term fluctuations and generating solid long-term returns.
Investors’ interest in high-quality stocks is evident from the Invesco S&P 500 Quality ETF’s (SPHQ) 3.4% returns over the past week.
Enghouse Systems Limited (EGHSF), Nitto Denko Corporation (NDEKY), and Utah Medical Products, Inc. (UTMD) hold solid long-term growth prospects and are relatively stable compared to the broader market. Given their high profitability, these stocks could be excellent long-term investments at their current discounted valuations. Our proprietary POWR Ratings system has rated these stocks Strong Buy.
Enghouse Systems Limited (EGHSF)
Based in Canada, EGHSF develops enterprise software solutions for automated mapping, facilities management, and geographic information systems worldwide. The company operates through the Interactive Management Group and Asset Management Group segments. It has a 0.83 beta.
On June 23, 2022, EGHSF acquired Competella AB, a Sweden-based provider of SaaS and On-Premise contact center and attendant console solutions that work effectively in the Microsoft Teams. This will allow EGHSF to help contact center agents and switchboard attendants access a rich array of tools, including directory search, presence, calendar, email, and IM, and fully integrated queuing and media control.
As of April 30, 2022, EGHSF had CAD227.38 million ($176.87 million) in cash and cash equivalents. The stock’s 9.52x forward EV/EBITDA is 20.2% lower than the 11.93x industry average. In terms of forward EV/EBIT, EGHSF is currently trading at 14.68x, which is 3.6% lower than the 15.22x industry average.
EGHSF’s gross profit margin and EBIT margin were 70.8% and 23.5%, respectively, over the past year. The stock has gained 8.3% over the past five days to close the last trading session at $22.16.
EGHSF’s POWR Ratings reflect this promising outlook. The stock has an overall A grade, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Stability and Quality and a B grade for Value. Click here for the additional ratings for EGHSF’s Sentiment, Growth, and Momentum. EGHSF is ranked #4 of 156 stocks in the Software - Application industry.
Nitto Denko Corporation (NDEKY)
Headquartered in Osaka, Japan, NDEKY is primarily engaged in the industrial tape business, optronics business, and life science business internationally. The company also offers functional thermal transfer systems, medical products, electrical and electronic equipment tapes, dust removal products, fluoroplastic sheets, tapes, porous films, and materials.
It offers its products to automotive and transportation, housing, infrastructure, material, home appliance, electrical, display, electronic device, medical, packaging, and consumer/personal care industries. It has a 1.23 beta.
On June 1, 2022, NDEKY acquired Bend Labs, Inc., a soft silicone sensor platform for measuring human motion, and named the company Nitto Bend Technologies. Bend’s sensor device technologies will be combined with NDEKY’s global foundation and core technologies to develop next-generation technologies and products and new businesses utilizing sensor-acquired data.
The flexible sensor is expected to meet the evolving technical demands in automation in the automotive field, remote monitoring in digital healthcare, and sports and robotics.
For its fiscal 2021 full year ended March 31, 2022, NDEKY’s revenues increased 12.1% year-over-year to ¥853.45 billion ($6.28 billion). The company’s gross profit came in at ¥302.39 billion (2.22biliion), representing a 24.2% rise from the prior-year period.
Its operating income came in at ¥132.36 billion ($972.86 million), up 41% from the year-ago period. While its net income increased 38.3% year-over-year to ¥97.23 billion ($715.22 million), its EPS increased 38.9% to ¥656. As of March 31, 2022, the company had ¥362.05 billion ($2.66 billion in cash and cash equivalents).
The consensus revenue estimate of $6.50 billion for its fiscal 2023 ending March 31, 2023, represents a 60.1% year-over-year improvement. It surpassed the consensus revenue estimates in three of the four trailing quarters.
The stock’s 4.90x forward EV/EBITDA is 22.6% lower than the 6.32x industry average. In terms of forward EV/Sales, NDEKY is currently trading at 1.11x, 18.9% lower than the 1.37x industry average.
NDEKY’s gross profit margin and EBIT margin were 35.4% and 14.9%, respectively, over the past year. Over the past year, the stock has gained 0.4% and closed the last trading session at $33.45.
NDEKY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Stability and Quality and a B grade for Value. Click here to see the additional ratings for NDEKY’s Growth, Sentiment, and Momentum. NDEKY is ranked #8 of 92 stocks in the A-rated Chemicals industry.
Utah Medical Products, Inc. (UTMD)
UTMD develops, manufactures, and distributes medical devices for the healthcare industry. The company serves neonatal ICUs, labor and delivery departments, women's health centers in hospitals, outpatient clinics, and physician's offices through direct customer service, sales force, independent consultants, and manufacturer representatives. It has a 0.24 beta.
For its fiscal 2022 first quarter ended March 31, 2022, UTMD’s net sales increased 12.4% year-over-year to $12.32 million. The company’s gross profit came in at $7.53 million, up 8.4% from the prior-year period. Its operating income came in at $4.52 million, representing a rise of 16.3% from the year-ago period.
UTMD’s net income came in at $3.53 million, indicating a 16.9% rise from the prior-year period. Its EPS increased 16.6% year-over-year to $0.96. The company had cash and investments of $65.87 million as of March 31, 2022.
The stock’s 9.39x trailing-12-month EV/EBITDA is 40.3% lower than the 15.72x industry average. In terms of trailing-12-month Price/Cash Flow, UTMD is currently trading at 15.66x, 17.1% lower than the 18.89x industry average.
UTMD’s gross profit margin and EBIT margin were 62.5% and 38.8%, respectively, over the past year. Over the past week, the stock has gained 5.4% and closed the last trading session at $88.98.
UTMD’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Stability and Quality and a B grade for Sentiment. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for UTMD’s Momentum, Growth, and Value here. UTMD is ranked #3 of 147 stocks in the Medical - Devices & Equipment industry.
EGHSF shares were trading at $22.17 per share on Tuesday afternoon, up $0.01 (+0.05%). Year-to-date, EGHSF has declined -38.52%, versus a -18.51% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
The post 3 Top-Rated Stocks to Buy and Hold Forever appeared first on StockNews.com