The stock market witnessed a recovery rally in July after reaching bear market territory during the year's first half. However, the market has lately surrendered some of the gains on concerns over an aggressive monetary policy stance by the Federal Reserve, the ongoing energy crisis in Europe, and signs of an economic slowdown in China.
Many analysts believe that the Fed will likely keep its hawkish stance intact until it reduces inflation to its target level. GLOBALT Investments’ senior portfolio manager, Tom Martin, said, “The market is biding its time to get more information on the most important things, which are inflation and the Fed’s rate path.”
Concerns over the pace of future rate hikes will likely keep the markets volatile in the near term. Therefore, investors must look for stocks currently trading at discounts to their peers but have strong fundamentals and solid growth prospects.
Freeport-McMoRan Inc. (FCX), Marubeni Corporation (MARUY), and Ryerson Holding Corporation (RYI) are currently trading at discounts to their peers. However, despite being available at a discounted price, FCX’s fundamentals and growth prospects look weak. So, it could be wise to avoid this stock. On the other hand, investors can look to buy MARUY and RYI, given their strong fundamentals and growth prospects.
Freeport-McMoRan Inc. (FCX)
FCX is a mining company that operates through geographical assets with proven and probable reserves of copper, gold, and molybdenum. The company’s segments include refined copper products, copper in concentrate, gold, molybdenum, oil, and others. Its segments include the Morenci, Cerro Verde, Grasberg copper mines, the Rod & Refining operations, and the United States Oil and Gas Operations.
For the fiscal second quarter ended June 30, 2022, FCX’s revenues increased 5.7% year-over-year to $5.41 billion. The company’s adjusted net income declined 25% year-over-year to $854 million. Also, its adjusted EPS declined 24.6% year-over-year to $0.58.
In terms of forward EV/EBITDA, FCX's 5.53x is 10.6% lower than the 6.19x industry average. Its forward P/S of 1.94x is 75% lower than the 1.11x industry average. Also, the stock's 7.08x forward EV/EBIT is 27.7% lower than the 9.79x industry average.
For the quarter ending September 30, 2022, FCX’s EPS and revenue are expected to decline 39% and 9% year-over-year to $0.54 and $5.53 billion, respectively. Over the past six months, the stock has declined 28% to close the last trading session at $31.32.
FCX’s POWR Ratings are consistent with this bleak outlook. The company has an overall rating of C, which translates to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a C grade for Value, Momentum, and Stability. Within the B-rated Industrial - Metals industry, it is ranked #21 out of 35 stocks. Click here to see the other ratings of Growth, Sentiment, and Quality.
Marubeni Corporation (MARUY)
Headquartered in Tokyo, Japan, MARUY trades in grains, feed ingredients, compound feeds, foods, agricultural and fishery products, and fresh and processed meat; apparel, footwear, lifestyle, and textile and industrial materials.
It also provides agri-inputs, contracting services for fertilizer application and crop protection products, technical services; petrochemicals and plastics, salts and chlor-alkalis, life science products, electronics materials, biomass fuels, pulp and waste papers, paper, paperboards, sanitary, and building and construction materials.
MARUY’s revenue increased 36.3% year-over-year to ¥2.91 trillion ($21.26 billion) for the first quarter ended June 30, 2022. The company’s operating profit increased 112.9% year-over-year to ¥147.32 billion ($1.07 billion). Its profit increased 79.8% year-over-year to ¥201.63 billion ($1.47 billion). In addition, its EPS came in at ¥116.76, representing an increase of 82.6% year-over-year.
In terms of forward EV/EBITDA, MARUY's 10.94x is 0.9% lower than the 11.04x industry average. Its forward P/S of 0.27x is 78.8% lower than the 1.30x industry average. Also, the stock's 16.05x forward EV/EBIT is 5% lower than the 15.28x industry average.
Analysts expect MARUY’s revenue for fiscal 2023 to increase 375% year-over-year to $63.88 billion. Over the past year, the stock has gained 31.3% to close the last trading session at $104.02.
MARUY’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Stability and a B for Sentiment. It is ranked #3 out of 35 stocks in the B-rated Industrial - Metals industry. To see the other ratings of MARUY for Growth, Momentum, and Quality, click here.
Ryerson Holding Corporation (RYI)
RYI processes and distributes industrial metals in the United States, Canada, Mexico, and China. It offers a line of products in carbon steel, stainless steel, alloy steel, aluminum, nickel, and red metals.
On June 1, 2022, RYI announced the acquisition of Ford Tool Steels (FTS), a tool steel processor based out of St. Louis, Missouri. FTS’s sawing and machining capabilities align with those of Southern Tool Steel, a member of RYI. Thus, this strategic acquisition is expected to recognize synergies between the two brands and enhance RYI’s growth and customer experiences.
In terms of forward EV/EBITDA, RYI's 2.49x is 59.7% lower than the 6.19x industry average. Its forward P/S of 0.18x is 83.7% lower than the 1.11x industry average. Also, the stock's 2.64x forward EV/EBIT is 73% lower than the 9.79x industry average.
For the fiscal second quarter ended June 30, 2022, RYI’s revenues increased 22.9% year-over-year to $1.74 billion. The company’s net income increased 74% year-over-year to $196.40 million. Its adjusted EBITDA improved 13.6% year-over-year to $224.20 million. Its adjusted EPS came in at $5.31, representing an increase of 328.2% year-over-year.
For fiscal 2022, RYI’s EPS and revenue are expected to increase 72.6% and 10.4% year-over-year to $12.88 and $6.27 billion, respectively. It surpassed consensus EPS estimates in each of the trailing four quarters. Over the past six months, the stock has gained 34.5% to close the last trading session at $30.41.
RYI’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Growth, Sentiment, and Quality. Within the same industry, it is ranked #2. Click here to see the other ratings of RYI for Momentum and Stability.
FCX shares were trading at $32.28 per share on Thursday morning, up $0.96 (+3.07%). Year-to-date, FCX has declined -21.70%, versus a -11.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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