The Fed has been in its most aggressive monetary tightening campaign since the 1980s to tame soaring inflation. However, inflation is showing signs of cooling down, which might prompt the Fed to slow the pace of its rate hikes. The November CPI headline rate marked the fifth-straight monthly decline, as prices rose 7.1% annually, down from 7.7% in October.
The central bank’s benchmark overnight lending rate currently sits in a target range of 3.75%-4.00%. The moderation in inflation has raised investors’ optimism about the further course of action of the Fed.
Despite the progress, the hot labor market, the war in Ukraine that continues to affect the prices of food and fuel, and China’s covid cases give rise to plenty of uncertainties. Moreover, inflation is still far from the 2% target of the Federal Reserve.
Given this backdrop, fundamentally strong stocks Garrett Motion Inc. (GTX) and Genie Energy Ltd. (GNE) might be solid buys now. These stocks are rated Strong Buy in our proprietary POWR Ratings system. Moreover, these stocks are trading at a discount.
Garrett Motion Inc. (GTX)
GTX provides turbocharger and electric boosting technologies for the automotive industry. The company offers light-vehicle gasoline, light-vehicle diesel, and commercial vehicle turbochargers; and provides automotive software solutions.
GTX’s forward Price/Sales multiple of 0.13x is 85.3% lower than the industry average of 0.86x. Its forward EV/EBITDA multiple of 2.49x is 72.8% lower than the industry average of 9.15x.
During the fiscal third quarter that ended September 30, 2022, GTX’s net sales rose 12.6% year-over-year to $945 million. Its gross profit grew 9.2% from its prior-year quarter to $178 million. The company’s comprehensive income increased 138% year-over-year to $169 million, while its adjusted EBITDA increased 9% year-over-year to $146 million.
Street expects GTX’s EPS to increase 74.7% year-over-year to $0.26 in the fiscal first quarter ending March 2023. Its revenue is expected to increase 4.9% year-over-year to $945 million in the same quarter.
Over the past six months, the stock has declined 1.4% to close the last trading session at $7.09.
GTX’s POWR Ratings reflect this promising outlook. The stock 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.
GTX also has an A grade for Value and a B for Quality. The stock is ranked #6 of 62 stocks in the A-rated Auto Parts industry.
To see the other ratings of GTX for Growth, Momentum Stability, and Sentiment, click here.
Genie Energy Ltd. (GNE)
GNE supplies electricity and natural gas to residential and small business customers internationally. It operates in three segments, Genie Retail Energy (GRE); GRE International; and Genie Renewables.
On December 6, 2022, GNE’s Genie Solar subsidiary received notice to proceed with constructing its first company-owned community solar generation project.
Michael Stein, CEO of the company, said, “The environmental benefit and the economics driving the development of community solar are compelling for the customers and the generators, and we expect to expand from this initial project to additional sites in the coming months.”
On November 30, 2022, the company acquired a portfolio of residential and small commercial customer contracts from Mega Energy. Backed by strong cash flow, this acquisition enables GNE to expand its footprint across seven states of retail supply markets.
In terms of trailing-12-months Price/Cash flow, GNE’s multiple of 2.19x is 80.7% lower than the industry average of 11.36x. Its trailing-12-months EV/EBITDA multiple of 2.03x is 85% lower than the industry average of 13.49x.
For the fiscal third quarter ended September 30, 2022, GNE’s gross profit increased 24.7% year-over-year to $43.14 million. The company’s income from operations rose 34.8% year-over-year to $23.54 million, while its adjusted EBITDA increased 35.3% from the year-ago value to $24.50 million.
Over the past year, GNE’s stock has gained 93.9% to close its last trading session at $10.14. It has gained 82.1% year-to-date.
It is no surprise that the stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
GNE also has an A grade for Value and a B for Momentum and Growth. It is ranked first among the 67 stocks in the Utilities – Domestic industry.
In addition to the POWR Rating grades highlighted, you can see the GNE ratings for Sentiment, Quality, and Stability here.
GTX shares were trading at $7.34 per share on Wednesday morning, up $0.25 (+3.53%). Year-to-date, GTX has declined -8.59%, versus a -13.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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