The market has been suffering a massive sell-off due to mounting concerns over the Fed’s aggressive interest rate hikes to control the high multi-decade inflation. Moreover, several analysts believe that if the central bank maintains its hawkish stance, the economy could eventually slip into a recession.
The Federal Reserve recently raised interest rates by 75 basis points, the most aggressive hike since 1994, and signaled more interest rate hikes ahead until inflation comes down. The 2-year Treasury yield exceeded the 10-year yield earlier this week, indicating that the economy may have already entered a recession.
According to Morgan Stanley, the S&P 500 is yet to price in a full-blown economic slowdown. The investment bank’s economists predict a 35% chance of recession by the first half of 2023.
Given this backdrop, it could be wise to invest in fundamentally sound stocks Adams Resources & Energy, Inc. (AE), Friedman Industries, Incorporated (FRD), Genie Energy Ltd. (GNE), Pampa Energía S.A. (PAM), and YPF Sociedad Anónima (YPF), which are currently trading at discounts to their peers. These stocks are rated Strong Buy in our POWR Ratings system.
Adams Resources & Energy, Inc. (AE)
AE is primarily involved in the marketing, transportation, terminalling, and storing of various crude oil and natural gas basins in the United States. The company has three operational segments: Crude Oil Marketing; Transportation and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt and Dry Bulk; and Pipeline Transportation, Terminalling, and Storage of Crude Oil.
For the first quarter ending March 31, 2022, AE’s total revenue increased 137.9% year-over-year to $774.25 million. Its operating earnings grew 111.6% from its prior-year quarter to $8.15 million, while its net income grew $116.9 million from its year-ago value to $6.09 million. The company’s EPS improved 110.6% from its year-ago value to $1.39.
The consensus EPS estimate of $3.46 for December 2022 represents a 25.8% improvement year-over-year. The stock has gained 8.6% year-to-date.
In terms of 0.02x forward EV/Sales, the stock is trading 99% lower than its industry average of 1.69x. Also, its 1.61x forward EV/EBITDA is trading 71.7% lower than its industry average of 5.68x.
AE's POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Momentum and Value. Within the B-rated Energy - Oil & Gas industry, it is ranked #1 of 97 stocks. To see additional POWR Ratings for Stability, Sentiment, Quality, and Growth for AE, click here.
Friedman Industries, Incorporated (FRD)
Headquartered in Longview, Texas, FRD is engaged in steel processing, pipe manufacturing and processing, and the steel and pipe distribution businesses in the United States. It has two operational segments, Coil and Tubular.
Last month, FRD announced purchasing two high-quality, strategically located facilities from Plateplus, Inc. (Plateplus), positioning Friedman as a North American steel service center leader with an expanded geographic presence, scale, and processing capabilities.
Also, in addition to the facilities acquired, Friedman purchased the steel inventory and customer relationships at two additional Plateplus locations.
For the third quarter ending December 31, 2021, FRD’s net sales increased 81.2% year-over-year to $51.66 million. The cash balance stood at $3.07 million for the three months ended December 31, 2021, while its net cash provided by financing activities stood at $14.59 million for the nine months ended December 31, 2021. The stock has declined 22.7% year-to-date.
In terms of 0.24x trailing-12-months EV/Sales, the stock is trading 83.1% lower than its industry average of 1.42x. Also, its 1.29x trailing-12-months forward EV/EBITDA is trading 86.9% lower than its industry average of 10.07x.
FRD's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The stock also has an A grade for Momentum, Growth, and Value. Within the A-rated Steel industry, it is ranked #9 of 33 stocks.
In total, we rate FRD on eight different levels. Beyond what we've stated above, we have also given FRD grades for Stability, Sentiment, and Quality. Get all the FRD ratings here.
Genie Energy Ltd. (GNE)
GNE supplies electricity and natural gas to residential and small business customers in the United States, Finland, Sweden, Japan, and internationally. It has three operational segments: Genie Retail Energy; GRE International; and Genie Renewables.
GNE’s total revenue came in at $83.90 million for the first quarter ended March 31, 2022. Its income from operations came in at $24.40 million, compared to a loss of $5.50 million in the previous period. The company’s EPS stood at $0.67 compared to a loss per share of $0.09 in the prior period.
The company’s revenue has grown at a 9.6% CAGR over the past five years. Over the past three years, its net income grew at a 29.3% CAGR. The company’s shares have surged 54.2% year-to-date and 55.1% over the past six months.
In terms of 0.41x trailing-12-months EV/Sales, the stock is trading 90.3% lower than its industry average of 4.16x. Also, its 1.86x trailing-12-months EV/EBITDA is trading 91.7% lower than its industry average of 22.83x.
It is no surprise that GNE has an overall A rating, equating to Strong Buy in our POWR Ratings system. The stock has an A grade for Value and a B for Momentum and Growth.
GNE is ranked #1 of 67 stocks in the D-rated Utilities - Domestic industry. Click here to see the additional POWR Ratings for GNE (Sentiment, Stability, Value, and Quality).
Pampa Energía S.A. (PAM)
PAM, an integrated power company, is engaged in generating and transmitting electricity in Argentina. The company operates through Electricity Generation; Oil and Gas; Petrochemicals; and Holding and Others business segments.
In the first quarter ended March 31, 2022, PAM’s sales revenue increased 53.7% year-over-year to AR$44.01 million ($0.35 million). The company’s operating income grew 46.9% from its year-ago value to AR$14.35 million ($0.11 million), while its net income improved 183% from its prior-year quarter to AR$10.45 million ($0.08 million). The company’s EPS rose 237.1% year-over-year to AR$7.45.
The $0.75 consensus EPS estimate for the fourth quarter, ending December 2022, represents a 0.1% improvement year-over-year. Analysts expect its revenue to increase 15.9% year-over-year to $389.27 million for the second quarter ending June 2022. The company’s shares have surged 30.6% over the past year.
In terms of forward 4.10x P/E, the stock is trading 79% lower than its industry average of 19.50x. Also, its forward 2.08x EV/Sales is trading 51.2% lower than its industry average of 4.27x.
PAMS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. PAM has also rated an A grade for Value and a B for Momentum and Sentiment. Within the B-rated Utilities – Foreign industry, it is ranked #3 of 54 stocks.
In total, we rate PAM on eight different levels. To see additional POWR Ratings for Growth, Stability, and Quality for PAM, click here.
YPF Sociedad Anónima (YPF)
Headquartered in Buenos Aires, Argentina, YPF is involved in the oil and gas upstream and downstream activities in Argentina. The company’s upstream operations include the exploration, development, and production of crude oil, natural gas, and NGLs.
Analysts expect YPF’s revenue to increase 6.5% year-over-year to $3.57 billion for the second quarter ending June 2022.
During the first quarter of 2022, YPF’s revenues increased 65.3% year-over-year to AR$234.89 million ($1.86 million). Its operating income grew 490% from its year-ago value to AR$6.85 million ($0.05 million), while its total comprehensive income improved 61.4% from its prior-year quarter to AR$63.41 million ($0.50 million). The stock has declined 19.1% year-to-date.
In terms of forward 1.33x P/E, the stock is trading 79.6% lower than its industry average of 6.50x. Also, its forward 0.59x EV/Sales is trading 64.9% lower than its industry average of 1.69x.
It is no surprise that YPF has an overall A rating, equating to Strong Buy in our POWR Ratings system. YPF has an A grade for Value and Momentum and a B grade for Quality.
In the A-rated Foreign Oil & Gas industry, it is ranked #8 of 42 stocks. Click here to see the additional POWR Ratings for YPF (Sentiment, Stability, Growth, and Quality).
AE shares were trading at $30.92 per share on Thursday afternoon, up $0.93 (+3.10%). Year-to-date, AE has gained 12.71%, versus a -17.71% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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