The Federal Reserve has raised interest rates aggressively this year to fight the multi-decade high inflation. The stock market slumped on fears of an economic slowdown. Over the past year, the S&P 500 has declined 19.5%, while the Dow Jones Industrial Average and the Nasdaq have fallen 8.8% and 33.6%, respectively.
The stock market might also remain under pressure in 2023, as the Fed’s interest-rate hikes threaten to push the economy into a recession. However, analysts at J.P. Morgan predict the S&P 500 to reach 4,200 by year-end 2023. In addition, analysts foresee better days ahead for the stock market.
This year's stock market selloff has led several fundamentally strong stocks to decline in price. These stocks are now trading at affordable prices, providing the opportunity to scoop them up.
Given this backdrop, it could be wise to invest in fundamentally sound stocks, Genie Energy Ltd. (GNE) and Epsilon Energy Ltd. (EPSN), trading at a discount.
Genie Energy Ltd. (GNE)
GNE and its subsidiaries supply electricity and natural gas to residential and small business customers internationally. It has three operational segments: Genie Retail Energy (GRE), GRE International, and Genie Renewables.
On December 6, 2022, GNE’s Genie Solar subsidiary received notice to proceed with constructing its first company-owned community solar generation project. Given the environmental benefit and the economics driving community solar development, GNE looks forward to expanding to additional sites in the coming months.
In addition, the company expects a notice to proceed with the second project in upstate New York in early 2023.
On November 30, 2022, the company acquired a portfolio of residential and small commercial customer contracts from Mega Energy. This acquisition is backed by its strong cash flows and should enable GNE to expand its footprint across seven states of retail supply markets.
GNE’s four-year average dividend yield is 2.97%, and its current dividend translates to a 2.81% yield. The company paid a dividend of $0.08 per share on November 21, 2022.
For the fiscal third quarter ended September 30, 2022, GNE’s gross profit increased 24.7% year-over-year to $43.14 million. The company’s income from operations rose 34.8% year-over-year to $23.54 million, while its adjusted EBITDA increased 35.3% from the year-ago value to $24.50 million.
Also, its net income attributable to common stockholders came in at $18.31 million compared to a net loss of $2.66 million in the prior-year period. In addition, its EPS stood at $0.70 compared to a net loss per share of $0.10 in the same quarter last year.
In terms of trailing 12-month EV/Sales, GNE is currently trading at 0.58x, 85.9% lower than the industry average of 4.11x. Its trailing 12-month EV/EBITDA multiple of 2.18 is 83.8% lower than the industry average of 13.49. In addition, its trailing 12-month EV/EBIT multiple of 2.21 is 90.4% lower than the industry average of 22.90x
The stock has gained 99.3% over the past year to close the last trading session at $10.78.
GNE's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating 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 and a B for Growth and Momentum. Within the Utilities - Domestic industry, it is ranked first out of 67 stocks. To see GNE’s rating for Stability, Sentiment, and Quality, click here.
Epsilon Energy Ltd. (EPSN)
EPSN, a natural gas and oil company, engages in the acquisition, development, gathering, and production of oil and gas reserves in the United States. It operates through Upstream and Gathering System segments.
On December 5, EPSN’s board of directors declared a dividend of $0.06 per share of common stock, payable on December 30 to its shareholders. The company’s four-year average dividend yield is 0.40%, and its current dividend translates to a 3.81% yield.
EPSN’s total revenue increased 62.2% year-over-year to $21.24 million for the third quarter that ended September 30, 2022. Its operating income increased 102.7% year-over-year to $14.39 million, while its net income grew 588.1% from the prior-year value to $9.61 million.
The company’s EPS came in at $0.41, representing a 583.3% year-over-year increase. In addition, its adjusted EBITDA increased 143.7% year-over-year to $16.54 million.
In terms of trailing 12-month EV/Sales, EPSN is currently trading at 1.62x, 13.4% lower than the industry average of 1.87x. Its trailing 12-month EV/EBITDA multiple of 2.11 is 68.9% lower than the industry average of 6.76. In addition, its trailing 12-month EV/EBIT multiple of 2.40 is 72.8% lower than the industry average of 8.83x.
Shares of EPSN have gained 15.3% over the past year to close the last trading session at $6.57.
EPSN’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It also has an A grade for Momentum and Quality. Out of 93 stocks in the B-rated Energy - Oil & Gas industry, it is ranked #2. To see the other ratings of EPSN for Growth, Value, Stability, and Sentiment, click here.
GNE shares were trading at $11.02 per share on Thursday afternoon, up $0.24 (+2.23%). Year-to-date, GNE has gained 107.06%, versus a -17.86% 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.
2 Cheap Stocks to Buy Now Before They Rocket Higher StockNews.com
