The inflation rate slowed to 7.1% in November, compared to 7.7% in October. Moreover, consumer confidence improved in December. Lynn Franco, Senior Director of Economic Indicators at the Conference Board, said, “Consumer confidence bounced back in December, reversing consecutive declines in October and November to reach its highest level since April 2022.”
However, the Fed signaled that it would continue raising interest rates in 2023 to battle inflation. The Fed’s consecutive rate hikes will likely push the economy into a recession.
Given the economic uncertainty, fundamentally sound stocks ARC Document Solutions, Inc. (ARC) and Good Times Restaurants Inc. (GTIM), which are trading under $3, could be solid additions to your portfolio. These stocks are rated Strong Buy in our POWR Ratings system.
ARC Document Solutions, Inc. (ARC)
ARC provides digital printing and other document-related services to clients in various industries through its 146 service locations. Its primary services include the digital printing of standard and specialized business papers and the production of customized display graphics in different shapes and sizes.
For the fiscal 2022 third quarter ended September 30, 2022, ARC’s net sales increased 1% year-over-year to $73.14 million, while its gross profit grew 4.3% year-over-year to $24.82 million. Its income from operations rose 16.2% from the year-ago value to $5.72 million.
In addition, the company’s net income came in at $3.71 million, an 18.1% increase year-over-year, and its EPS stood at $0.09, up 28.6% from the year-ago quarter.
The stock’s trailing-12-month EV/Sales of 0.63x is 61.7% lower than the industry average of 1.65x. Also, its trailing-12-month EV/EBIT of 9.72x compares with the 16.55x industry average. Furthermore, ARC’s trailing-12-month Price/Cash Flow multiple of 3.73 compares with the industry average of 15.74.
Shares of ARC have gained 15.7% over the past six months to close the last trading session at $2.95.
ARC’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock also has an A grade for Sentiment, Quality, and Value. ARC has earned the top position among 42 stocks in the Outsourcing- Business Services industry.
Click here to see additional ratings of ARC for Growth, Stability, and Momentum.
Good Times Restaurants Inc. (GTIM)
GTIM runs restaurants throughout the United States. It operates through two segments: Bad Daddy's Burger Bar restaurants (Bad Daddy's), which have 42 locations, and Good Times Burgers & Frozen Custard (Good Times), which have 32 locations.
For the fiscal 2022 fourth quarter ended September 27, 2022, GTIM’s restaurant sales increased 5% year-over-year to $34.95 million, while its total net revenues also grew 5% year-over-year to $36.19 million. The company’s franchise revenues rose 2.9% from the prior year’s quarter to $245 million.
As of September 27, 2022, the company's cash and cash equivalents stood at $8.91 million, compared to $8.86 million as of September 28, 2021, while its current assets stood at $11.88 million, compared to $11.44 million as of September 28, 2021.
GTIM’s trailing-12-month EV/Sales of 0.52x is 53% lower than the industry average of 1.11x. Also, its trailing-12-month Price/Sales of 0.22x is 74.7% lower than the 0.86x industry average. Furthermore, the stock’s trailing-12-month Price/Cash Flow multiple of 5.44 compares with the industry average of 13.09.
Analysts expect the company’s EPS to grow 30% per annum over the next five years. Shares of GTIM have gained 4.1% intra-day to close the last trading session at $2.41.
GTIM’s POWR Ratings reflect its strong outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The stock has an A grade for Value. Within the Restaurants industry, it has topped among 47 stocks.
Click here to see additional ratings of GTIM for Quality, Growth, Sentiment, Momentum, and Stability.
ARC shares were trading at $2.95 per share on Thursday morning, down $0.00 (0.00%). Year-to-date, ARC has gained 0.68%, versus a -0.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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