There is increasing talk of a looming recession as the effects of the Federal Reserve’s interest rate hikes start to ripple through the economy. The recent collapse of three midsized banks has raised concerns about lenders’ tightening of credit access, which could further contribute to the economic slowdown.
Therefore, in this piece, I’ve highlighted sound value stocks CIRCOR International, Inc. (CIR), Consolidated Water Co. Ltd. (CWCO), and Cidara Therapeutics, Inc. (CDTX), which have shown promising returns despite the current economic landscape.
Amidst the bank turmoil and a slowing economy, April’s job growth exceeded expectations, with nonfarm payrolls increasing by 253,000, surpassing the projected growth of 180,000 as reported by the Labor Department. The unemployment rate was 3.4% against an estimate of 3.6% and tied for the lowest level since 1969.
Moreover, the Personal Consumption Expenditures (PCE) price index rose 0.4% in April, excluding food and energy costs, higher than the 0.3% Dow Jones estimate. On an annual basis, the gauge increased by 4.7%, which is 0.1 percentage point higher than expected, the Commerce Department reported.
Despite the Fed’s efforts, consumer spending and the labor market remain strong, suggesting policymakers may need further action. Former Federal Reserve Chair Ben Bernanke, who guided the central bank and the U.S. economy through the Great Recession, thinks central bankers still have work to do to bring down inflation.
In addition, while the tentative deal to raise the debt ceiling has been finalized, it could take time for the stock market to stabilize. The immediate impact could be turbulent, as investors might shift towards US Treasuries temporarily, reducing liquidity in the stock market.
Treasury Secretary Janet Yellen said last week. “One of the concerns I have is that even in the run-up to an agreement, when one does occur, there can be substantial financial market distress. We’re seeing just the beginnings of it,” referring to stock and bond market volatility.
Let’s take a look at the stocks mentioned above:
CIRCOR International, Inc. (CIR)
CIR provides mission-critical flow control products and services. The company operates through two segments: Industrial; and Aerospace & Defense.
CIR’s forward P/E of 14.01x is 21.2% lower than the industry average of 17.79x. Its forward P/S multiple of 0.72 is 43.2% lower than the industry average of 1.28.
CIR’s normalized net income has grown at a CAGR of 48.2% over the past three years. In addition, its EBIT has grown at a CAGR of 10.3% over the past three years.
During the fiscal first quarter that ended April 2, 2023, CIR’s net revenue increased 9.4% year-over-year to $203.10 million. Its gross profit increased 34% year-over-year to $74.07 million. The company reported an operating income of $17.92 million, compared to an operating loss of $11.79 million in the year-ago quarter.
Moreover, CIR’s adjusted net income increased 891.2% and 960% year-over-year to $10.89 million and $0.53 per share, respectively.
CIR’s revenue is expected to increase 6.2% year-over-year to $203.30 million in the fiscal second quarter ending June 2023. Its EPS is expected to increase 6.3% year-over-year to $0.34 in the current quarter. The company has surpassed consensus EPS and revenue estimates in each of the trailing four quarters, which is remarkable.
The stock has gained 74% over the past nine months and 58.5% over the past year to close the last trading session at $29.99.
CIR’s POWR Ratings reflect this 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, each weighted to an optimal degree.
CIR also has an A grade for Sentiment and a B for Growth, Value, and Momentum. It is ranked #24 among 91 stocks in the B-rated Industrial – Equipment industry.
To access additional ratings for CIR’s Stability and Quality, click here.
Consolidated Water Co. Ltd. (CWCO)
Headquartered in Grand Cayman, the Cayman Islands, CWCO designs, constructs, manages, and operates water production and water treatment plants primarily in the Cayman Islands, the Bahamas, and the United States. The company operates through four segments: Retail; Bulk; Services; and Manufacturing.
CWCO’s forward EV/Sales multiple of 1.78 is 54.4% lower than the industry average of 3.90. Its forward EV/EBITDA multiple of 9.57 is 15.7% lower than the industry average of 11.35.
CWCO’s revenue and levered free cash flow have grown at CAGRs of 14% and 9.9% over the past three years.
CWCO pays an annual dividend of $0.34, which translates to a yield of 1.73% at the current market price. Its four-year average dividend yield is 2.55%.
During the fiscal first quarter that ended March 31, 2023, CWCO’s revenues increased 68.1% year-over-year to $32.87 million. Its gross profit grew 47.8% from its year-ago quarter to $10.56 million. The company’s net income attributable to CWCO came in at $3.81 million or $0.24 per share, rising 122.1% and 118.2% year-over-year.
Analysts expect CWCO’s revenue to rise 46% year-over-year to $30.75 million in the current fiscal quarter ending June 2023. Its EPS is estimated to increase 33.3% year-over-year to $0.20 in the current quarter. It has an impressive earnings surprise history, surpassing its consensus revenue estimates in each of the trailing four quarters.
Over the past year, the stock has gained 46.8%, closing the last trading session at $19.70. It has gained 16.9% over the past month and 33.1% year-to-date.
CWCO’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
It also has an A grade for Momentum and a B for Growth and Value. Within the 12-stocks Water industry, it is ranked first.
Click here to see the additional ratings for CWCO (Stability, Sentiment, and Quality).
Cidara Therapeutics, Inc. (CDTX)
Biotechnology company CDTX focuses on the discovery, development, and commercialization of long-acting anti-infectives for treating and preventing infectious diseases and oncology in the United States.
On April 24, 2023, CDTX announced the receipt of a $20 million milestone payment from Melinta Therapeutics for exclusive rights to commercialize recently U.S. FDA-approved REZZAYO (rezafungin for injection), a novel, echinocandin antifungal approved for the treatment of candidemia and invasive candidiasis.
REZZAYO is the first FDA-approved echinocandin in over a decade for once-weekly use in adults with limited treatment options. CDTX is also eligible to receive additional non-dilutive capital of up to $47 million in development and regulatory milestones from existing partnerships. This positions the company for potential growth and advancement in the biotechnology industry.
CDTX’s forward EV/Sales multiple of 0.98 is 72.8% lower than the industry average of 3.61. Its forward P/S of 1.60x is 62.6% lower than the industry average of 4.26x.
CDTX’s revenue has grown at a CAGR of 52.5% over the past three years.
CDTX’s total revenues rose 265.6% year-over-year to $25.99 million in the fiscal first quarter that ended March 31, 2023. Its total operating expenses decreased 9.3% year-over-year to $23.01 million.
Additionally, its net income attributable to common shareholders and net earnings per common share stood at $2.53 million and $0.03, compared to net loss and net loss per share of $18.28 million and $0.27, respectively, in the previous-year quarter.
Street expects CDTX’s revenue to increase 85.8% year-over-year to $11.55 million for the fiscal second quarter ending June 2023. Its EPS is expected to rise 31.6% year-over-year in the same quarter. In addition, the company has surpassed consensus revenue and EPS estimates in three of the four trailing quarters.
Over the past year, shares of CDTX have soared 208.5% to close its last trading session at $1.36. The shares have gained 32% over the past month and 79.8% year-to-date.
CDTX’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, Sentiment, and Quality. The stock is ranked #14 in the 378-stock Biotech industry.
In addition to the POWR Ratings stated above, CDTX’s rating for Momentum and Stability can be seen here.
What To Do Next?
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CIR shares were unchanged in premarket trading Tuesday. Year-to-date, CIR has gained 25.17%, versus a 10.25% 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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