Value-conscious investors look for stocks trading at or near 52-week low prices, which can be a powerful 'potential' bottoming indicator. Fifty-two weeks is one trading year, roughly containing 252 trading days. Hence, investors can also use the 200-day moving average to reference a stock's value position.
Every so often, stocks will reach these bearishly low levels. If you're lucky, these stocks are those of amazing companies that are on sale.
However, investors frequently fear that there must be a reason behind the price falling. And while they may be right, today's task is to figure out if these names are worth your time - and potential investment.
Dollar Tree
Shares of Dollar Tree (NASDAQ: DLTR) have been badly beaten after the company raised its prices to $1.25 per item despite being part of the one-dollar club. In addition to being at a 52-week low, this stock has declined more than 25.3% year-to-date, creating a wide underperformance of 38.1% relative to the S&P 500 during the same period.
This is when it is helpful to remember that the news always follows the stock price, so investors should expect negative headlines to haunt the stock for a while. Here is why you should think twice before letting these messages get to you.
The company's latest investor presentation showcases an exciting trend that dismantles any bearish momentum the news may carry. While bears suggested that the price increase would result in a massive exodus of customers from the brand, the opposite has been confirmed. On an annualized basis, the first and second quarters of 2023 saw customer traffic increases of 5.5% and 9.6%, respectively.
Dollar Tree continues to successfully deliver value to its customers while compromising for necessary changes to respond to drastic inflationary environments in the nation. However, value does not stop at the customer; shareholders are also about to feel some of the love.
With a consensus price target of $152.82 a share, analysts are suggesting that there is a current 45% upside from today's compressed prices. That is likely a key reason that State Street (NYSE: STT) bumped its stake in the stock by 1.5%.
Planet Fitness
Shares of Planet Fitness (NYSE: PLNT) have declined more than 20% in the past month after markets digested the news that CEO Chris Rondeau was unexpectedly asked to resign during a board meeting.
Once again, news follows the stock price, so your best bet is to count on the media, making it seem like something horrible is happening to the business. The truth is, it's not that bad.
Considering that management repurchased up to $100 million in stock, which represents up to 2.5% of the company's market capitalization, investors can pick up the stock for a lot cheaper valuation than where insiders thought it to be cheap enough to buy.
More importantly, the fundamentals remain solid in the business, as gross profit margins have remained above 80% for the past three years while revenues have grown by 27.6% during the past twelve months. Most high-quality business moats begin with high gross margins; ask Warren Buffett.
Management also provided their outlook for the rest of 2023 relative to 2022, starting with a 34% jump in earnings per share. Indeed, this gave analysts enough fuel since their courage levels were at an all-time high.
With a consensus price target of $71.9 a share, the implication is that Planet Fitness needs to rally by as much as 57% to make this prediction a reality. It's not too bad for a stock that is undergoing an internal leadership crisis.
J.M. Smucker
Typically, stocks operating in 'defensive' industries don't tend to swing as much as others, which is why this deal stands out from all others in disregarding market fundamentals.
Shares of J.M. Smucker (NYSE: SJM) have recently declined by as much as 11% despite the company beating quarterly earnings expectations. Whatever the reason behind the panic, much good can be made from this short-term sell-off.
Starting with an annualized dividend yield of 3.3%, making it the highest payout since the COVID-19 pandemic, evidence of possible undervaluation begins to form. A 2.0x price-to-sales ratio will confirm that, based on this metric, the stock is the cheapest it has been since more than a decade ago.
Analysts are assigning a consensus upside of 15.4% to this stock as they spot a clear comeback path for this company to return to its former glory. Remember that famous 200-day moving average? J.M. Smucker just crossed beneath it, so expect some buying blocks to become noticeable shortly.
