With elevated interest rates and an increasing likelihood of a recession, the stock market is expected to remain volatile in the near term. So, fundamentally strong stocks PulteGroup, Inc. (PHM) and YPF Sociedad Anónima (YPF), which have gained solid momentum, could be great portfolio additions now.
The Federal Reserve raised its benchmark rate to a range of 5% to 5.25%, the highest level since 2007, in an effort to combat inflation. The latest increase was the 10th straight interest-rate hike since last March. This is the most aggressive rate-hiking regime since the 1980s.
Bill Winters, Chief Executive Officer of Standard Chartered, stated that he sees a big recession in the United States as unlikely, although a period of negative growth was possible.
According to the Conference Board, the most current recession probability estimates based on its probability model remain near 99%, indicating a recession in the United States over the next 12 months.
Let’s delve deeper into the fundamentals of the stocks.
PulteGroup, Inc. (PHM)
PHM is primarily engaged in the homebuilding business in the United States. It acquires and develops land for residential purposes and constructs housing on such land. The company also offers various home designs, including single-family detached, townhomes, condominiums, and duplexes.
On April 25, 2023, PHM’s board of directors approved a $1 billion increase to the company’s share repurchase program, bringing the total share repurchase authorization to $1.2 billion. This indicates its solid financial performance and potential to generate long-term shareholder value.
PHM’s trailing-12-month net income margin of 16.18% is 261.9% higher than the industry average of 4.47%. Its trailing-12-month ROCE of 32.14% is 200% higher than the industry average of 10.71%.
For the first quarter that ended on March 31, 2023, PHM’s total revenue increased 13.5% year-over-year to $3.58 billion. The company’s net income came in at $532.26 million, up 17.1% year-over-year, while its EPS increased 28.4% from the prior-year quarter to $2.35.
Analysts expect PHM’s EPS to come in at $9.30 in 2023.Its EPS is expected to grow 9.2% per annum for the next five years. PHM’s shares have gained 75.6% over the past six months to close the last trading session at $67.73.
The stock is currently trading above its 50-day and 200-day moving averages of $59.35 and $48.35, respectively, indicating an uptrend.
PHM’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.
PHM has an A grade for Momentum and a B grade for Quality. Within the B-rated Homebuilders industry, it is ranked #5 out of 24 stocks. Click here for the additional POWR Ratings for Sentiment, Value, Growth, and Stability for PHM.
YPF Sociedad Anónima (YPF)
YPF engages in the oil and gas upstream and downstream activities in Argentina. The company’s upstream operations include the exploration, development, and production of crude oil, natural gas, and NGLs. Its downstream operations include the refining, marketing, transportation, and distribution of oil, petroleum products, natural gas, and others. It is headquartered in Buenos Aires, Argentina.
YPF’s trailing-12-month CAPEX /Sales and asset turnover ratio of 21.06% and 0.72x are 79.3% and 8.15% higher than the industry averages of 11.75% and 0.67x, respectively.
For the fiscal fourth quarter that ended March 2022, YPF’s revenues increased 23.9% year-over-year to $4.65 billion. Its adjusted EBITDA grew 9.5% from the year-ago value to $933 million. Also, its net income for the quarter stood at $464 million, reflecting a 69.3% increase year-over-year. Moreover, its EPS was $1.19, up 70% from the prior-year quarter.
Street expects YPF’s EPS to come in at $3.58 in 2023.Its EPS is expected to grow 47.9% per annum for the next five year. Over the past year, the stock has gained 200.6% to close the last trading session at $11.74.
The stock is currently trading above its 50-day and 200-day moving averages of $11.13 and $8.65, respectively, indicating an uptrend.
It’s no surprise that YPF has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and Momentum and a B for Quality. It is ranked #4 out of 42 stocks in the Foreign Oil & Gas industry.
Beyond what is stated above, we’ve also rated YPF for Sentiment, Growth, and Stability. Get all YPF ratings here.
The Bear Market is NOT Over…
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REVISED: 2023 Stock Market Outlook >
PHM shares were trading at $67.58 per share on Wednesday afternoon, down $0.15 (-0.22%). Year-to-date, PHM has gained 48.86%, versus a 7.96% 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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