Surging inflation, Russia’s invasion of Ukraine, soaring crude oil and natural gas prices, and the possibility of aggressive interest rate hikes by the Federal Reserve caused significant volatility for most of the first quarter. However, the stock market staged a recovery over the past few weeks.
In March, after increasing the interest rates for the first time in more than three years, the Federal Reserve has forecasted raising interest rates throughout 2022, to control the multi-decade high inflation. Investors generally prefer value stocks over growth stocks in an inflationary environment. The major market indexes seem to have factored in all the adverse developments that had resulted in the volatility, so when the market rebounds, value stocks are expected to bounce back. Investors’ interest in value stocks is evident from the Vanguard Value ETF’s (VTV) 1% returns year-to-date, compared to the S&P 500’s 4% loss.
That’s why today we're highlighting 3 exciting stocks from our Top 10 Value screen, which is just 1 of the 10 screens in our POWR Screens 10 service (more on that below). We believe fundamentally sound stocks Ingles Markets, Incorporated (IMKTA), Heritage-Crystal Clean, Inc (HCCI), and ARC Document Solutions, Inc. (ARC), which are currently trading at a discount to their peers, are worthwhile investments now.
Ingles Markets, Inc. (IMKTA)
IMKTA is a supermarket chain in the southeast United States. The company’s supermarkets offer customers a range of nationally advertised food products, including grocery and meat. Non-food products include fuel centers, pharmacies, health/beauty/cosmetic products, general merchandise, and private label items.
IMKTA’s net sales increased 16.9% year-over-year to $1.39 billion for the first quarter ended December 25, 2021. The company’s net income increased 23% year-over-year to $66.18 million. Also, its EPS came in at $3.48, representing an increase of 30.8% year-over-year.
In terms of trailing-12-month EV/S and P/S, IMKTA’s 0.42x and 0.33x are lower than the industry averages of 1.81x and 1.35x, respectively. Also, its trailing-12-month P/B of 1.62x is 44.4% lower than the 2.91x industry average.
Analysts expect IMKTA’s EPS to grow 14.5% over the next five years. Over the past nine months, the stock has gained 52.5% to close the last trading session at $89.36.
IMKTA’s POWR Ratings reflect solid prospects. The company has an overall rating of A, which translates to a Strong 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 a B grade for Growth, Stability, and Quality. It is ranked #3 out of 39 stocks in the A-rated Grocery/Big Box Retailers. Click here to see the other ratings of IMKTA for Momentum and Sentiment.
Heritage-Crystal Clean, Inc. (HCCI)
HCCI provides full-service parts cleaning, containerized waste management, used oil collection, wastewater vacuum services, antifreeze recycling, field services, and owns and operates a used oil re-refinery. The company has two segments. The Environmental Services segment consists of full-service parts cleaning, wastewater vacuum, antifreeze, and field services. The Oil Business segment consists of used oil collection, re-refining activities, oil filter removal, etc.
On September 30, 2021, HCCI acquired Denver, CO, based on AET Environmental. HCCI President and CEO Brian Recatto said, “Their tremendous amount of technical experience and capabilities has been critical to their long-term success, and we will lean on their expertise as we continue to expand our technical and field services capabilities across the company.”
For the fiscal fourth quarter ended January 1, 2022, HCCI’s total revenues increased 28.3% year-over-year to $169.50 million. The company’s adjusted EBITDA increased 88.9% year-over-year to $35.69 million. Also, its adjusted net earnings grew 177.2% year-over-year to $18.69 million. In addition, its adjusted EPS came in at $0.79, representing an increase of 172.4% year-over-year.
In terms of forward EV/S and P/S, HCCI’s 1.37x and 1.32x are lower than the industry averages of 1.74x and 1.38x, respectively. Moreover, its forward EV/EBITDA of 7.56x is 30.9% lower than the industry average of 10.94x.
For fiscal 2022, HCCI’s revenue is expected to increase 6.3% year-over-year to $547.77 million. Its EPS is expected to grow 15% per annum over the next five years. Over the past month, the stock has gained 7.1% to close the last trading session at $29.77.
HCCI’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Stability, Sentiment, and Quality. Within the A-rated Waste Disposal industry, it is ranked first out of 17 stocks. To see the other ratings of HCCI for Growth and Momentum, click here.
ARC Document Solutions, Inc. (ARC)
ARC is a digital printing company that provides digital printing and document-related services to customers in various industries. Its primary services include digital printing of general and specialized business documents such as those found in marketing and advertising, engineering and construction, and other industries.
For the fiscal fourth quarter ended December 31, 2021, ARC’s net sales increased 7.6% year-over-year to $69.24 million. The company’s adjusted net income increased 170% year-over-year to $2.71 million. Also, its adjusted EBITDA increased 1.9% year-over-year to $10.38 million. In addition, its adjusted EPS came in at $0.06, representing an increase of 200% year-over-year.
In terms of trailing-12-month EV/S and P/S, ARC’s 0.85x and 0.60x are lower than the industry averages of 1.93x and 1.50x, respectively. Also, its trailing-12-month P/B of 1.09x is 59% lower than the 2.67x industry average.
For fiscal 2022, ARC’s EPS and revenue are expected to increase 36.4% and 5.8% year-over-year to $0.30 and $288.03 million, respectively. Over the past nine months, the stock has gained 79.5% to close the last trading session at $3.86.
ARC’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has an A grade for Value, Sentiment, and Quality and a B grade for Growth. Within the B-rated Outsourcing – Business Services industry, it is ranked first out of 44 stocks. To see the other ratings of ARC for Momentum and Stability, click here.
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IMKTA shares were trading at $89.27 per share on Monday morning, down $0.09 (-0.10%). Year-to-date, IMKTA has gained 3.59%, versus a -3.90% 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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