U.S. inflation remains alarmingly high despite the Fed's relentless efforts to tame it. Although inflation has shown signs of slowing over the past few months, Fed officials have indicated further rate hikes ahead.
While the market witnessed a bout of selloffs since last year, this offers the right opportunity to scoop up fundamentally solid stocks, Vertex Pharmaceuticals Incorporated (VRTX) and The Kroger Co. (KR), which seem to be trading at a discount.
On the other hand, market sentiments have been improving lately. According to market veteran Ed Yardeni, the U.S. has a 60% chance of avoiding a recession, and stocks could notch a new all-time high this year as the market rebounds.
In addition, value or bargain stocks are expected to maintain their winning streak against growth stocks amid rising rates. Goldman Sachs' experts believe value stocks' outperformance to continue in 2023.
Investors' interest in value stocks is evident from the SPDR Portfolio S&P 500 Value ETF's (SPYV) 4.2% gains over the past six months.
So, let's delve deeper into these stocks mentioned above:
Vertex Pharmaceuticals Incorporated (VRTX)
Biotechnology company VRTX develops and commercializes therapies for treating cystic fibrosis.
VRTX's forward P/E of 22.32x is 17.4% lower than the industry average of 27.03x. Its trailing-12-month EV/EBITDA of 14.30x is 6.3% lower than the industry average of 15.27x.
Its trailing-12-month gross profit margin of 59.60% is 6.5% higher than the industry average of 55.99%, while its trailing-12-month EBITDA margin of 50.69% is substantially higher than the industry average of 3.74%.
VRTX's net product revenues came in at $2.30 billion for the fourth quarter that ended December 31, 2022, up 11.1% year-over-year. Its non-GAAP net income increased 25.9% year-over-year to $978 million, while its non-GAAP EPS came in at $3.76, representing a 24.5% year-over-year rise.
Analysts expect VRTX's revenue to increase 8.6% year-over-year to $9.70 billion in the current fiscal year, 2023. Its EPS is expected to rise 5.8% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 26.2% to close the last trading session at $290.29.
VRTX's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VRTX has an A grade for Quality and a B for Value. Within the Biotech industry, it is ranked #3 out of 400 stocks. Click here for the additional POWR Rating for Growth, Momentum, Stability, and Sentiment for VRTX.
The Kroger Co. (KR)
KR operates as a retailer in the United States. The company operates combination food and drug stores, multi-department stores, marketplace stores, and price-impact warehouses.
KR's forward P/E of 12.72x is 35.3% lower than the industry average of 19.64x. Its forward EV/Sales of 0.34x is 79.4% lower than the industry average of 1.64x.
Its trailing-12-month ROCE and ROTC of 24.00% and 9.38% are 143.6% and 52.2% higher than the industry averages of 9.85% and 6.17%.
KR's sales came in at $34.20 billion for the third quarter that ended November 5, 2022, up 7.3% year-over-year. Its current assets came in at $13.40 billion, up marginally year-over-year.
Street expects KR's revenue to increase 7.6% year-over-year to $148.40 billion in 2023. Its EPS is expected to be 12.8% year-over-year to $4.15 in 2023. It surpassed EPS estimates in all four trailing quarters. KR's shares have lost marginally intraday to close the last trading session at $43.14.
It's no surprise that KR has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has a B grade for Growth, Value, and Quality.
KR is ranked #9 out of 38 stocks in the A-rated Grocery/Big Box Retailers industry. Get additional POWR Ratings for KR (Momentum, Stability, and Sentiment) here.
What To Do Next?
Get your hands on this special report:
What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low-priced companies with the most upside potential in today's volatile markets.
But even more important is that they are all top Buy rated stocks according to our coveted POWR Ratings system, and they excel in key areas of growth, sentiment and momentum.
Click below now to see these three exciting stocks that could double or more in the year ahead.
VRTX shares were trading at $289.87 per share on Wednesday morning, down $0.42 (-0.14%). Year-to-date, VRTX has gained 0.38%, versus a 3.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
2 Bargain Stocks to Buy For 2023 And Beyond StockNews.com
