Amid the current uncertain macroeconomic environment and lingering recessionary fear, insider trading activity can be a valuable indicator for investors decisions.
In this article, I have evaluated two stocks that have recently seen insider buying activity, and I think quality stock FedEx Corporation (FDX) that pays stable dividends might be worth considering for investment.
However, given its weak fundamentals, RumbleON, Inc. (RMBL) might be best avoided now.
According to data published by the Bureau of Labor Statistics, prices rose 5% in the 12 months to March, down from 6% in February. That’s the ninth consecutive monthly drop in annual inflation, putting it at its lowest since May 2021.
US inflation eased last month to its lowest in nearly two years. Still, stubbornly high rents kept underlying inflation pressures simmering, likely ensuring that the Federal Reserve will raise interest rates again next month.
Moreover, while staff economists at the Federal Reserve had predicted subdued growth and a weakening economy during policy decision meetings since November 2022 last month, they said the banking crisis heightened that forecast to a recession.
Additionally, Fidelity Investments recently warned that the US banking sector might face further turmoil as the Federal Reserve grapples with balancing inflation control and financial stability concerns. The firm stated that the Fed is now in a “twilight zone” where it can’t control inflation without hurting financial stability.
Stock to Buy:
FedEx Corporation (FDX)
FDX provides transportation, e-commerce, and business services in the United States and internationally.
Recently, it was announced that FDX’s Independent Director, Amy Lane, paid $233 per share to buy $193 thousand worth of FDX stock. Also, FDX Executive VP & Chief Sales Officer, Jill Brannon, had purchased FDX shares worth $334 thousand over the past year.
FDX’s forward P/S multiple of 0.64 is 50.7% lower than the industry average of 1.29. Its forward EV/EBITDA multiple of 9.95 is 14.5% lower than the industry average of 11.63.
Its trailing-12-month asset turnover ratio of 1.09x is 36.1% higher than the 0.80x industry average.
FDX pays $5.04 annually as dividends. This translates to a yield of 2.18% at the current price, compared to the 4-year average dividend yield of 1.51%. Its dividend payments have grown at CAGRs of 21% and 18.1% over the past three and five years, respectively.
FDX’s service segment revenue increased 33.8% year-over-year to $87 million in the fiscal third quarter, which ended February 28, 2023. The company’s total operating expenses decreased 5.3% year-over-year to $21.13 billion, while ground segment operating income rose 31.7% year-over-year to $844 million.
Analysts expect FDX’s revenue for the fiscal fourth quarter ending May 2023 to be $22.72 billion. The company’s EPS is expected to be $4.93 for the same quarter.
The stock has gained 47% over the past six months to close the last trading session at $230.69. In addition to this, the stock gained 33.2% year-to-date. The stock has a 24-month beta of 0.98.
FDX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
FDX also has a B grade for Sentiment and Quality. It is ranked #4 of 16 stocks in the B-rated Air Freight & Shipping Services industry.
To access additional ratings for FDX’s Stability, Growth, Value, and Momentum, click here.
Stock to Sell:
RumbleON, Inc. (RMBL)
RMBL operates a technology-based omnichannel platform in North America. It operates through three segments: Powersports; Automotive; and Vehicle Logistics.
On April 11, 2023, RMBL’s major shareholder Stone House Capital Management purchased RMBL shares worth $410,500 for an average price of $8.21 per share. Following the completion of the purchase, the insider now owns 1,800,000 shares in the company, valued at approximately $14,778,000. The purchase was disclosed in a filing with the SEC.
RMBL’s forward EV/EBIT multiple of 15.96 is 23.1% higher than the industry average of 12.97.
Its trailing-12-month CAPEX/Sales of 0.31% is 90.1% lower than the 3.15% industry average. Its trailing 12-month gross profit margin of 25.24% is 28.4% lower than the 35.23% industry average.
RMBL’s total revenue declined 14.1% year-over-year to $369.50 million in the fiscal fourth quarter that ended December 31, 2022. Its adjusted EBITDA declined 23% year-over-year to $18.7 million in the same quarter.
Its adjusted net loss came in at $11 million, compared to a net income of $9 million in the previous-year quarter. Also, its adjusted loss per share came in at $0.68, compared to earnings per share of $0.60 in the previous-year quarter.
Street expects RMBL’s revenue to decline 26.6% year-over-year to $337.71 million in the fiscal first quarter that ended March 2023. Its EPS is expected to be negative $0.30 for the same quarter. The company has failed to surpass the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 66.2% over the past year, closing the last trading session at $7.84. The stock has a 24-month beta of 1.52.
RMBL’s grim prospects are reflected in its POWR Ratings. The stock has an overall D rating, which translates to a Sell in our POWR Ratings system.
RMBL has an F grade for Stability and a D for Sentiment, Growth, and Quality. It is ranked last among 28 stocks in the D-rated Internet - Services industry.
For additional POWR Rating for Value and Momentum for RMBL, click here.
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FDX shares were trading at $229.96 per share on Monday morning, down $0.73 (-0.32%). Year-to-date, FDX has gained 33.51%, versus a 8.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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