The stock market is expected to remain highly volatile in the near term due to various macroeconomic headwinds and rising recessionary concerns. Amid this backdrop, investors could buy fundamentally sound stocks LiveRamp Holdings, Inc. (RAMP), PROG Holdings, Inc. (PRG), and Proto Labs, Inc. (PRLB), which hold the potential for solid returns.
In April, the Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation gauge, recorded a 0.4% month-on-month increase and a 4.4% year-over-year rise. Excluding volatile food and energy costs, the core PCE increased by 0.4% for the month and 4.7% from the previous year.
Amid persistently high inflation, Americans have grown less optimistic about the current state of the economy. The Conference Board reported a drop in its Consumer Confidence Index (CCI) to 102.3 in May from 103.7 in April. Overall, consumer confidence has declined for the fourth time in five months.
Moreover, the Expectations Index, which measures consumers’ outlook for income, business, and labor conditions over the next six months, slightly declined to 71.5 past month from 71.7 in April. A reading below 80 often signals an upcoming recession. Since February 2022, the reading has consistently been below 80, except for one month.
Given an uncertain economic outlook, several Fed officials are sending positive signals that they could pause rate hikes at the central bank’s meeting this month; however, interest rate increases could resume later this year.
“Skipping a rate hike at a coming meeting would allow (Fed policymakers) to see more data before making decisions” about whether to further increase interest rates, said Fed Governor Philip Jefferson this Wednesday. Also, Philadelphia Fed President Patrick Harker made similar comments and supported a pause in the June rate hike.
Given uncertain economic conditions, investors may turn to fundamentally sound and quality stocks RAMP, PRG, and PRLB that could deliver solid returns.
Let’s delve deeper into the fundamentals of the featured stocks.
LiveRamp Holdings, Inc. (RAMP)
RAMP is a global technology company that provides an enterprise platform for data collaboration. It enables secure and privacy-conscious sharing of first-party consumer data between companies and their business partners. RAMP’s solutions encompass data collaboration, activation, measurement and analytics, identity, and data marketplace.
On March 1, RAMP partnered with Adobe Real-Time Customer Data Platform (CDP), part of Adobe Experience Cloud. This partnership would enable RAMP to enhance its capabilities and expand its reach, offering marketers simplified activation through RampID, accelerating the company’s growth and providing a stronger market.
On February 27, RAMP expanded its partnership with Data Cloud company Snowflake to enhance its product capabilities on Snowflake and improve data connectivity for post-cookie marketing. This should enable RAMP to activate multiple marketing and media destinations directly from Snowflake, boosting the company’s revenue streams and growth.
The stock’s trailing-12-month gross profit margin of 71.49% is 46.4% higher than the 48.83% industry average. Likewise, its trailing-12-month levered FCF margin of 11.93% is 66.3% higher than the 7.17% industry average.
For the fiscal fourth quarter that ended March 31, 2023, RAMP’s revenues increased 4.9% year-over-year to $148.63 million. Its gross profit was 2.8% year-over-year to $105.15 million. The company’s adjusted EBITDA rose 277.3% from the prior year’s period to $15.14 million.
Furthermore, the company’s non-GAAP net earnings from continuing operations and EPS stood at $21.13 million and $0.32, compared to a loss and loss per share of $635 thousand and $0.01, respectively.
The consensus revenue estimate of $615.18 million for the fiscal year (ending March 2024) reflects a 3.1% year-over-year improvement. Likewise, the consensus EPS estimate of $1.11 for the current year indicates a 29.3% rise year-over-year. Moreover, the company surpassed the consensus EPS estimates in all four trailing quarters, which is impressive.
Shares of RAMP have gained 10.2% over the past six months to close the last trading session at $24.71.
RAMP’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
RAMP has an A grade for Sentiment and a B for Value and Quality. It has ranked #8 in the 82-stock Technology - Services industry.
In addition to the POWR Ratings I’ve just highlighted, you can see RAMP’s ratings for Growth, Momentum, and Stability here.
PROG Holdings, Inc. (PRG)
PRG provides lease-purchase solutions. With over 30,000 retail partner locations across 46 states and the District of Columbia, including e-commerce merchants, it serves a wide customer base. The company operates through three segments, Progressive Leasing; Vive Financial; and Four Technologies.
On May 23, PRG introduced Build, a financial technology company offering the Build Credit Builder Account. This innovative account, issued by WebBank, combines the advantages of an installment loan and a secured savings account, enabling consumers to build credit history and personal savings simultaneously.
Build is currently available in 16 states. Moreover, PRG aims to provide access to Build’s services nationwide, benefiting consumers across all 50 states and the District of Columbia by the end of 2023. This could foster financial growth and stability for the company.
PRG’s trailing-12-month levered FCF margin of 78.81% is 419.8% higher than the 15.16% industry average. Additionally, its trailing-12-month ROTC and ROTA of 21.19% and 7.92% compare to the industry averages of 5.21% and 1.12%, respectively.
PRG’s operating profit increased 53.8% year-over-year to $76.08 million for the fiscal first quarter that ended March 31, 2023. Its adjusted EBITDA rose 38.9% from the year-ago value to $89.70 million. Also, the company’s non-GAAP net earnings and non-GAAP EPS grew 67.4% and 94.7% from the prior-year period to $53,41 million and $1.11, respectively.
PRG’s revenue is expected to grow 1.3% year-over-year to $2.37 billion for the fiscal year ending December 2024. The consensus EPS estimate of $2.90 for the next year reflects an 8.4% rise year-over-year. Also, the company topped the consensus EPS estimates in all four trailing quarters.
The stock has gained 93.4% year-to-date to close the last trading session at $32.45.
PRG’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
PRG has a B grade for Growth, Quality, and Sentiment. It is ranked #15 within the A-rated 80-stock Industrial - Services industry.
Click here to access additional PRG ratings (Value, Momentum, and Stability).
Proto Labs, Inc. (PRLB)
PRLB is a digital manufacturer of custom prototypes and on-demand production parts. It offers a range of manufacturing services, including injection molding, CNC machining, 3D printing, and sheet metal fabrication. The company serves various industry verticals such as medical, computer electronics, industrial machinery, aerospace, and automotive.
On February 16, PRLB introduced instant Design for Additive Manufacturability (DfAM) analysis for 3D-printed parts on its online quoting platform. PRLB’s DfAM capabilities are expected to revolutionize the 3D printing quoting experience, enhance the customer experience, and streamline the decision-making process for additive manufacturing.
On February 9, PRLB broadened production capabilities in its global CNC machining service, delivering a comprehensive and versatile manufacturing solution to customers. This expansion, combined with PRLB’s quick-turn CNC machining services, could cater to diverse customer needs, foster growth, and provide enhanced value to its clientele.
PRLB’s trailing-12-month gross profit margin of 43.55% is 45.1% higher than the 30.01% industry average. Its trailing-12-month levered FCF margin of 11.64% is 123.3% higher than the 5.21% industry average. Furthermore, the stock’s trailing-12-month CAPEX/Sales of 4.50% compare to the industry average of 2.86%
For the fiscal first quarter that ended March 31, 2023, PRLB’s revenue increased 1.4% year-over-year to $125.86 million. Its cash inflow from operating activities rose 27% from the year-ago value to $22.58 million. As of March 31, 2023, the company’s cash and cash equivalents are $62.05 million, compared to $56.56 million as of December 31, 2022.
Analysts expect PRLB’s revenue to increase 5.8% year-over-year to $533.89 million for the fiscal year ending December 2024. The company’s EPS for the same period is expected to grow 30.3% from the prior year to $1.56. Furthermore, the company surpassed the consensus EPS estimates in all four trailing quarters.
The stock has gained 24.2% year-to-date to close the last trading session at $31.41.
PRLB’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
PRLB has a B grade for Growth, Momentum, and Quality. It has ranked #2 out of five stocks within the Technology - 3D Printing industry.
Click here to access additional PRLB ratings for Value, Stability, and Sentiment.
What To Do Next?
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RAMP shares were trading at $25.08 per share on Friday afternoon, up $0.37 (+1.50%). Year-to-date, RAMP has gained 7.00%, versus a 12.31% 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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