The January 2022 Consumer Price Index (CPI) revealed that year-over-year inflation rose to 7.5%. This topped analysts expectations and is the highest rate in forty years.
During times of high inflation, value stocks typically outperform growth stocks. As the inflationary pressure is expected to persist, betting on quality bargains could be rewarding. Investors’ interest in value stocks is evident from the SPDR Series Trust SPDR Portfolio S&P 500 Value ETF’s (SPYV) 12.8% returns over the past year.
That’s why today we're highlighting 3 stocks from our Top 10 Value screen, which is just 1 of the 10 outperforming screens in our POWR Screens 10 service (more on that below). JBS S.A. (JBSAY), Compañía Cervecerías Unidas S.A. (CCU) and Valhi, Inc. (VHI) are currently trading at discounts to their peers despite possessing strong fundamentals. So, these stocks could be solid bets now.
JBS S.A. (JBSAY)
Headquartered in Sao Paulo, Brazil, JBSAY is engaged in the meat processing sector. The company processes and trades in animal protein worldwide. It offers beef, pork, chicken, and lamb products and by-products, food products, pet food, concentrates, and bresaola. Its segments include Brazil, Seara, JBS USA Beef, JBS USA Pork, and PPC.
On December 13, 2021, JBSAY announced that it had agreed to acquire Italy-based delicatessen Grupo King’s. It will be incorporated by JBSAY’s subsidiary Rigamonti. Under the deal, Rigamonti also received a 20% stake in hog producer Piggly and will hold commercial operations of King’s and Principe. JBSAY Chief Executive Gilberto Tomazoni said, “This deal follows our strategic goal of growing in very high value-added products. It puts us among the leaders in the Italian salumeria sector and also boosts our commercial strategy in the U.S.''
JBSAY’s net revenue increased 32.2% year-over-year to R$92.62 billion ($17.93 billion) for the third quarter ended September 30, 2021. The company’s net income increased 142.1% year-over-year to R$7.64 billion ($1.47 billion). Also, its adjusted EBITDA increased 74.2% year-over-year to R$13.92 billion ($2.69 billion).
In terms of forward EV/S and P/S, JBSAY’s 0.45x and 0.24x are lower than the industry averages of 1.88x and 1.35x, respectively. Moreover, its forward EV/EBITDA of 3.65x is 70.3% lower than the industry average of 12.32x.
Analysts expect JBSAY’s revenue for fiscal 2021 to increase 43.1% year-over-year to $68.58 billion. Over the past year, the stock has gained 48% to close the last trading session at $13.87.
JBSAY’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates 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 Sentiment and a B grade for Growth and Stability. It is ranked #2 out of 84 stocks in the B-rated Food Makers industry. Click here to see the other ratings of JBSAY for Momentum and Quality.
Compañía Cervecerías Unidas S.A. (CCU)
CCU is based in Santiago, Chile. It is a diversified beverage company operating as a brewer, soft drinks producer, water and nectar producer, wine producer, and pisco distributor. The company’s segments include Chile, International Business, and Wine. Its portfolio consists of a range of brands of alcoholic and non-alcoholic beer.
For the fourth quarter ended December 31, 2021, CCU’s revenue increased 37.1% year-over-year to CLP 822.35 billion ($1.02 billion). The company’s net income increased 33.8% year-over-year to CLP 73.64 billion ($0.09 billion). Also, its EPS came in at CLP 199.3, representing an increase of 33.7% year-over-year.
In terms of forward EV/S and P/S, CCU’s 1.25x and 1.07x are lower than the industry averages of 1.88x and 1.35x, respectively. Moreover, its forward non-GAAP P/E of 16.69x is 7.8% lower than the industry average of 18.12x.
For fiscal 2023, CCU’s EPS and revenue are expected to increase 23.7% and 15.1% year-over-year to $1.23 and $3.28 billion, respectively. The stock has gained 1.1% year-to-date to close the last trading session at $16.59.
CCU’s POWR Ratings reflect solid prospects. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B grade for Value. Within the B-rated Beverages industry, it is ranked #4 out of 36 stocks. To see the other ratings of CCU for Growth, Momentum, Stability, and Sentiment, click here.
Valhi, Inc. (VHI)
VHI is engaged in chemical, component products, and real estate management and development businesses. It operates through its wholly-owned and majority-owned subsidiaries, including NL Industries, Inc., Kronos Worldwide, Inc., CompX International, Inc., Tremont LLC, Basic Management, Inc., and the LandWell Company.
VHI’s net sales increased 26.2% year-over-year to $578.90 million for the third quarter ended September 30, 2021. The company’s net income increased 153.2% year-over-year to $39 million. Also, its EPS came in at $1.36, representing an increase of 151.8% year-over-year.
In terms of EV/EBIT and EV/EBITDA, VHI’s 6.23x and 4.77x are lower than the industry averages of 13.03x and 8.82x, respectively. Moreover, its forward non-GAAP P/E of 6.96x is 51.8% lower than the industry average of 14.43x.
Analysts expect VHI’s EPS and revenue for fiscal 2021 to increase 111.2% and 14.2% year-over-year to $3.78 and $2.11 billion, respectively. The stock has gained 30.6% over the past year to close the last trading session at $26.29.
VHI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Stability and Sentiment. It is ranked #4 out of 89 stocks in the A-rated Chemicals industry. Click here to see the other ratings of VHI for Growth, Momentum, and Quality.
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CCU shares were trading at $15.93 per share on Monday afternoon, down $0.66 (-3.98%). Year-to-date, CCU has declined -2.93%, versus a -8.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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