Geopolitical concerns, rising inflation, and interest rate hikes weighed on investors’ sentiments, resulting in significant stock market volatility. Although the stock market may remain volatile in the short term, investors can consider buying FedEx Corporation (FDX).
However, it could be best to avoid fundamentally weak RumbleON, Inc. (RMBL).
According to recently released Federal Reserve data, the fallout of the banking crisis is likely to push the country into recession later this year.
Because of this, Fed officials anticipate fewer interest-rate hikes this year, fearing that banks may restrict lending and harm the economy. The uncertainty in the banking industry also aided Fed officials in agreeing to raise their main interest rate by 0.25 percentage point rather than a half-point, despite signals that inflation was still too high, according to the minutes.
While the world’s largest economy’s banking system remains resilient and stable, the prospect of a prolonged economic recession cannot be discounted following unfavorable developments in the crucial sector, according to Jamie Dimon, chief executive of JPMorgan Chase.
He further added, “ The current crisis is not yet over, and even when it is behind us, there will be repercussions from it for years to come.”
Amid the uncertainties, while some stocks are worth buying, some fundamentally weak stocks are best steered clear of.
Let’s discuss the stocks mentioned above in detail.
Stock to Buy:
FedEx Corporation (FDX)
FDX provides transportation, e-commerce, and business services in the United States and internationally. The company’s FedEx Express segment offers express transportation, small-package ground delivery, and freight transportation services; time-critical transportation services; and cross-border enablement, technology, and e-commerce transportation solutions.
FDX’s forward EV/Sales multiple of 1 is 38.4% lower than the industry average of 1.62. Its forward EV/EBITDA multiple of 9.61 is 8.9% lower than the industry average of 10.56.
FDX’s trailing-12-month CAPEX/Sales of 7.35% is 157.5% higher than the industry average of 2.85%. Its trailing-12-month asset turnover ratio of 1.09% is 36.1% higher than the industry average of 0.80%.
FDX’s service segment revenue increased 33.8% year-over-year to $87 million in the fiscal third quarter, which ended February 28, 2023. The company’s total operating expenses decreased 5.3% year-over-year to $21.13 billion, while ground segment operating income increased 31.7% year-over-year to $844 million.
Analysts expect FDX’s revenue to increase marginally year-over-year to $91.50 billion in 2024. Its EPS is expected to grow 22.7% year-over-year to $18.28 in 2024. It has surpassed EPS estimate in three of four trailing quarter. FDX’s shares have gained 46.1% over the past six months to close the last trading session at $229.31.
FDX’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FDX has a B grade for Sentiment and Quality. Within the B-rated Air Freight & Shipping Services industry, it is ranked #5 out of 16 stocks. Click here for the additional POWR Ratings for Growth, Value, Momentum, and Stability for FDX.
Stock to Sell:
RumbleON, Inc. (RMBL)
RMBL operates a technology-based omnichannel platform in North America. It operates through three segments: Powersports; Automotive; and Vehicle Logistics.
RMBL’s forward EV/Sales multiple of 1 is 38.4% higher than the industry average of 1.62. Its forward EV/EBITDA multiple of 9.61 is 8.9% higher than the industry average of 10.56.
FDX’s trailing-12-month CAPEX/Sales of 0.31% is 90.1% lower than the industry average of 3.15%. Its trailing-12-month EBITDA margin of 5.09% is 55.5% lower than the industry average of 11.43%.
RMBL’s total revenue declined 14.1% year-over-year to $369.50 million in the fiscal fourth quarter that ended December 31, 2022. Its adjusted EBITDA decreased 23% year-over-year to $18.7 million in the same quarter.
Its adjusted net loss came in at $11 million, compared to a net income of $9 million in the previous-year quarter. Also, its adjusted loss per share came in at $0.68, compared to earnings per share of $0.60 in the previous-year quarter.
Street expects RMBL’s revenue to decline 15.9% year-over-year to $1.51 billion in 2023. Its EPS is expected to be negative $0.41 in 2023. It has failed to surpass the EPS estimates in each of the trailing four quarters. Over the past year, the stock has lost 66.5% to close the last trading session at $7.75.
RMBL’s poor prospects are reflected in its POWR Ratings. The stock has an overall D rating, translating to a Sell in our POWR Ratings system.
RMBL has an F grade for Stability and a D for Sentiment, Growth, and Quality. It is ranked last among 28 stocks in the D-rated Internet- Services industry. For additional POWR Ratings for Value and Momentum for RMBL, click here.
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FDX shares were trading at $229.05 per share on Tuesday afternoon, down $0.26 (-0.11%). Year-to-date, FDX has gained 32.98%, versus a 8.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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