The stock market ended 2022 as the worst year since the 2008 economic meltdown, with the Fed launching four consecutive 75-basis-point rate increases in 2022 before wrapping the year with a slightly lower 50-basis-point rate hike.
However, as inflation showed some signs of easing in recent months, the Fed is poised to slow the pace of their interest-rate hikes going forward. Citigroup Inc. Chief Executive Officer Jane Fraser says the Federal Reserve could slow rate hikes in late spring or by early summer.
However, Fed Chair Jerome Powell has cautioned against undue optimism until the central bank manages to get a complete grip on soaring inflation.
In addition, the upsurge of COVID-19 cases in China has affected demand. Moreover, the ongoing Russia-Ukraine conflict contributed to a wintertime global oil and gas crisis resulting in supply-chain disruptions. Thus, investors believe that trading will remain volatile, and stocks will be under pressure in the near term.
However, the current market backdrop gives investors a golden opportunity to add quality stocks to their portfolios, trading at attractive valuations. Given the fundamental strength, these stocks are expected to rebound faster when the market starts recovering. Fundamentally sound stocks Biogen Inc. (BIIB), AutoNation, Inc. (AN), and AdvanSix Inc. (ASIX) might be quality investments now.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. It offers TECFIDERA, AVONEX, PLEGRIDY, FAMPYRA, etc., for treating MS; SPINRAZA for SMA treatment; ADUHELM for treating Alzheimer’s; and FUMADERM for the treatment of severe plaque psoriasis.
On January 6, 2023, Eisai Co., Ltd. and BIIB announced that under the Accelerated Approval Pathway, the FDA had approved LEQEMBI (lecanemab-irmb) 100 mg/mL injection for the treatment of Alzheimer's disease (AD). It is an important milestone and will likely be demanded as a new treatment option to help meet the unmet needs of the patients.
On January 4, BIIB and Alcyone Therapeutics announced their license and collaboration agreement to evaluate a novel device to improve patient experience and access to neurological ASO therapies.
Through this agreement, BIIB aims to leverage the ThecaFlex DRx system to improve the patient treatment experience and accessibility for a broader population suffering from neurological disorders, such as spinal muscular atrophy (SMA) and amyotrophic lateral sclerosis (ALS).
In the third quarter that ended September 30, 2022, BIIB’s income before income tax expense and equity in loss of investee, net of tax, increased 370.7% year-over-year to $1.37 billion. The total cost and expenses declined 54.3% year-over-year to $1.14 billion.
Net income attributable to BIIB improved 244.7% from the year-ago value to $1.13 billion, while its EPS came in at $7.84, representing a 253.2% year-over-year improvement.
In terms of forward non-GAAP P/E, BIIB is trading at 16.37x, 19.1% lower than the industry average of 20.24x. Its forward EV/EBITDA multiple of 10.87 is 19.2% lower than the industry average of 13.46. In addition, BIIB’s forward EV/EBIT ratio of 13.03 is 26.7% lower than the industry average of 17.77.
Analysts expect BIIB’s EPS to increase 3.2% year-over-year to $3.50 in the fourth quarter, which ended on December 31, 2022. BIIB surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Shares of BIIB have gained 27.2% over the past six months to close the last trading session at $280.13.
BIIB’s strong fundamentals are reflected in its POWR Ratings. The stock's overall A rating translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Value, Sentiment, and Quality. It is ranked #3 out of 398 stocks in the Biotech industry. Click here to see the other ratings of BIIB (Growth, Momentum, and Stability).
AutoNation, Inc. (AN)
AN is an automotive retailer operating through three segments: Domestic; Import; and Premium Luxury. It offers a range of automotive products and services, including new and used vehicles, parts and automotive repair and maintenance services, and automotive finance and insurance products.
On December 12, 2022, AN announced the acquisition of RepairSmith, a full-service mobile solution for automotive repair and maintenance, to expand its After-sales business. This should improve the company’s operative capability.
On November 15, the company acquired a 6.1% minority ownership stake in TrueCar, Inc. (TRUE), an automotive digital marketplace that connects auto buyers and sellers to its nationwide network of certified dealers. This acquisition allows both companies to collaborate on ways to provide a superior digital buying and selling experience for consumers.
"We believe that TrueCar, with its leading digital marketplace, is well positioned to enhance the digital car buying experience and provide personal transportation solutions that are easy, transparent, and Customer-centric," said Mike Manley, AN’s Chief Executive Officer.
AN’s revenue increased 4.5% year-over-year to $6.67 billion in the fiscal third quarter (ended September 30, 2022). Its gross profit grew 3.2% from the year-ago value to $1.31 billion, while its operating income was up 3.8% year-over-year to $522.50 million. The company’s net income amounted to $352.60 million, while its adjusted EPS came in at $6, representing an increase of 17.2% year-over-year for the same period.
In terms of forward non-GAAP P/E, AN is trading at 4.58x, 67.1% lower than the industry average of 13.94x. Its forward EV/Sales multiple of 0.39 is 67.1% lower than the industry average of 1.19. In addition, AN’s forward EV/EBIT ratio of 5.18 is 61% lower than the industry average of 13.29.
AN’s revenue for fiscal 2022, which ended on December 31, 2022, is expected to increase 3.5% year-over-year to $26.76 billion. Its EPS is expected to increase 33.1% year-over-year to $24.14 for the past year. It surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 13.2% over the past three months to close the last trading session at $110.57.
It’s no surprise that AN has an overall rating of B, which translates to Buy in our POWR Ratings system. The stock has an A grade for Value and a B for Quality. In the B-rated Auto Dealers & Rentals industry, it is ranked #6 of 20 stocks.
Beyond what we’ve stated above, we have also given AN grade for Growth, Momentum, Stability, and Sentiment. Get all AN rating here.
AdvanSix Inc. (ASIX)
ASIX is a manufacturer of Nylon 6, a polymer resin that is a synthetic material used to produce fibers, filaments, engineered plastics, and films. It also sells caprolactam, ammonium sulfate fertilizer, acetone, and other intermediate chemicals, all of which are produced within unit operations across its integrated manufacturing value chain.
ASIX’s net sales increased 22.3% year-over-year to $1.54 billion for the nine-month period that ended September 30, 2022. The company’s adjusted net income grew 17.9% from the year-ago value to $145.96 million, while its adjusted EBITDA increased 12.5% from the previous year’s value to $241.90 million. Also, its adjusted EPS came in at $5, representing a 16.8% year-over-year increase for the same period.
In terms of forward EV/Sales, ASIX is trading at 0.69x, 54.7% lower than the industry average of 1.52x. Its forward EV/EBITDA multiple of 4.28 is 43.3% lower than the industry average of 7.55. In addition, its forward Price/Sales multiple of 0.57 is 50.4% lower than the industry average of 1.14.
Street expects ASIX’s EPS and revenue for the fourth quarter that ended on December 31, 2022, to increase 96.9% and 12.5% year-over-year to $1.58 and $476.90 million, respectively. The stock has gained 25.1% over the past three months to close the last trading session at $41.56.
ASIX’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has an A grade for Value and Sentiment and a B for Quality. In the B-rated Chemicals industry, it is ranked #5 out of 89 stocks.
In addition to the POWR Rating grades I have highlighted, you can check other ratings of ASIX for Growth, Momentum, and Stability here.
BIIB shares were trading at $284.59 per share on Friday afternoon, up $4.46 (+1.59%). Year-to-date, BIIB has gained 2.77%, versus a 2.92% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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