Given the high inflation rates, more aggressive federal rate hikes are expected in the coming quarters. According to Jamie Dimon, Chairman and Chief Executive of JPMorgan Chase & Co., the Fed has a tough job controlling inflation without precipitating a recession.
The benchmark indexes reversed their prior week's gains in June’s first trading session on volatility and inflationary concerns. However, the extended market sell-off has allowed several fundamentally sound stocks to trade at discounted valuations. Cheap and significantly undervalued stocks with robust financials seem well-positioned to weather the short-term fluctuations and rally in the near term. Rising investor interest in value stocks is evident in the Vanguard Value ETF’s (VTV) marginal gains over the past month.
The stocks of fundamentally-sound companies Friedman Industries, Incorporated (FRD), Ultralife Corporation (ULBI), and Century Casinos, Inc. (CNTY) are currently trading at less than $10. Furthermore, these stocks look undervalued, considering their growth prospects. In addition, they each have a Strong Buy rating in our proprietary POWR Ratings system with an A grade for Value.
Friedman Industries, Incorporated (FRD)
FRD in Humble, Tex., engages in steel processing, pipe manufacturing and processing, and the steel and pipe distribution businesses in the United States. It operates in two segments–Coil and Tubular. The company has plants in Hickman, Arkansas, Decatur, Alabama and Lone Star, Texas.
On May 2, 2022, FRD announced the acquisition of two high-quality, strategically located facilities from Plateplus, Inc. The agreement is expected to help the company attain better consumer reach in the near term.
For its third quarter, ended Dec. 31, 2021, FRD’s net sales increased 81.2% year-over-year to $51.66 million. Its coil segment sales came in at $41.80 million, up 92.9% year-over-year. And its tubular segment sales were $9.86 million, up 44.4% year-over-year.
In terms of trailing-12-month EV/S, FRD’s 0.31x is 81% lower than the 1.64x industry average. Its 1.67x trailing-12-month EV/EBITDA is also lower than the 8.00x industry average.
Over the past three months, the stock has gained 30.9% in price to close yesterday’s trading session at $9.95.
It is no surprise that FRD has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. In addition, it has an A grade for Growth, Value, and Momentum and a B grade for Quality.
FRD is ranked #9 of 33 stocks in the A-rated Steel industry. Click here to see the additional POWR Ratings for FRD (Stability and Sentiment).
Ultralife Corporation (ULBI)
ULBI and its subsidiaries design, manufacture, install and maintain power and communication and electronics systems worldwide. The Newark, N.Y.-based company operates in two segments–Battery and Energy Products and Communications Systems.
On April 28, 2022, Michael D. Popielec, President and CEO, said, “Looking forward, as we balance the impact of current supply chain disruptions, we continue to advance new product development initiatives, receive early acceptance of our new product rollouts, and transition new products to production, thereby retaining the view that our long-term profitable growth drivers, strategy, and expectations remain sound and achievable.”
ULBI’s total revenues have increased 16.9% year-over-year to $30.37 million for the first quarter, ended March 31, 2022. Its battery and energy products revenue came in at $29.15 million, up 31.8% year-over-year. And its total current assets were $69.14 million for the period ended March 31, 2022, compared to $66.52 million for the period ended Dec. 31, 2021.
The stock’s forward EV/S and P/S of 0.73x and 0.60x, respectively, are lower than the 1.62x and 1.28x industry averages.
Analysts expect ULBI’s revenue to increase 34.2% to $131.90 million in 2022. Its EPS is expected to increase 2,500% to $0.24 for fiscal 2022. The stock closed yesterday’s trading session at $4.91.
ULBI’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.
ULBI has an A grade for Value and a B grade for Momentum, Sentiment, and Quality. Within the B-rated Industrial - Equipment industry, it is ranked #11 out of 93 stocks. Click here to see the additional POWR Ratings for Growth and Stability for ULBI.
Click here to check out our Industrial Sector Report for 2022
Century Casinos, Inc. (CNTY)
Colorado Springs, Colo.-based CNTY operates as a casino entertainment company in the United States, Canada, and Poland. The company develops and operates gaming establishments and related lodging, restaurant, horse racing, and entertainment facilities.
On May 6, 2022, Erwin Haitzmann and Peter Hoetzinger, CNTY’s Co-CEOs, said, “We have completed the first portion of our acquisition of the Nugget Casino Resort and are excited to enter the growing Reno/Sparks Nevada market with this transaction. The addition of the Nugget is expected to grow the Adjusted EBITDA of our United States segment to approximately 80% of our total Adjusted EBITDA.”
For the first quarter, ended March 31, 2022, CNTY’s net operating revenue increased 42.4% year-over-year to $103.10 million. Its adjusted EBITDA came in at $23.82 million, up 61.6% year-over-year. In addition, its EPS was $0.01, compared to a $0.05 loss per share in the previous period.
The stock’s 0.60x forward P/S is 33.2% lower than the 0.89x industry average. Its 5.58x forward EV/EBITDA is also lower than the 8.68x industry average.
CNTY’s revenue is expected to be $528.81 million in 2023, representing a 19.4% year-over-year rise. In addition, the company’s EPS is expected to increase 78% year-over-year to $1.05 in the same period. The stock closed yesterday’s trading session at $8.85.
It is no surprise that CNTY has an overall A rating, which equates to a Strong Buy in our proprietary rating system. In addition, it has an A grade for Value and a B grade for Quality.
CNTY is ranked #3 of 29 stocks in the Entertainment - Casinos/Gambling industry. Click here to see the additional POWR Ratings for CNTY (Growth, Momentum, Stability, and Sentiment).
What To Do Next?
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FRD shares were trading at $10.10 per share on Thursday afternoon, up $0.15 (+1.51%). Year-to-date, FRD has gained 8.10%, versus a -12.49% 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.
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