The stock market is about to end a painful year for investors. Things turned out to be bleak for the so-called ‘Santa Claus rally’ with all three major indexes marching towards their biggest declines since 2008.
As we head into 2023, uncertainty hangs in the air. With factors including Federal Reserve interest-rate tightening to bring down inflation and increasing recession fears, many investors expect choppy trading for 2023. Fed policymakers asserted firmly to tighten monetary policy next year until price stability is restored. However, easing inflationary pressures have kept the hopes alive that the Fed could further dial down the size of its hikes.
With the market expected to continue witnessing volatility in the upcoming months, investing in shares of fundamentally strong businesses with solid growth prospects seems ideal to cushion one’s portfolio.
Thus, it could be the right time to buy fundamentally strong stocks Yext, Inc. (YEXT), Overseas Shipholding Group, Inc. (OSG), and ARC Document Solutions, Inc. (ARC), which are trading at significant discounts to their peers.
Yext, Inc. (YEXT)
YEXT is engaged in organizing business facts to provide official answers to consumer questions starting with the business’ own website and then extending across search engines and voice assistants. Its platform allows businesses to structure the facts about their brands into a Knowledge Graph, then leverages a complementary set of products to deliver relevant and actionable answers.
On November 14, the company announced the availability of its category-leading search product in the AWS Marketplace. This introduction enables AWS customers to consolidate billing, simplify procurement, and realize faster time-to-value with Yext Search.
YEXT’s non-GAAP income from operations came in at $2.69 million for the third quarter ended October 31, 2022, compared to a loss from operations of $4.90 million a year ago. The company’s non-GAAP net income amounted to $2.51 million compared to a net loss of $5.47 million in the prior-year quarter. Also, its non-GAAP EPS came in at $0.02 versus a loss per share of $0.04 in the same period last year.
In terms of forward EV/Sales, YEXT is currently trading at 1.86x, 24.9% lower than the industry average of 2.47x. Its forward Price/Sales multiple of 1.96 is 20.4% lower than the industry average of 2.46.
Street expects YEXT’s revenue for fiscal 2022 ending January 31, 2022, to increase 2.2% year-over-year to $399.32 million. It has surpassed the EPS estimates in each of the trailing four quarters. Over the past three months, the stock has gained 39.7% to close the last trading session at $6.41.
YEXT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Value, Sentiment, and Quality. Out of 53 stocks in the Software - Business industry, it is ranked first. Click here to see the other ratings of YEXT for Momentum and Stability.
Overseas Shipholding Group, Inc. (OSG)
OSG is the owner and operator of a fleet of oceangoing vessels engaged in transporting crude oil and petroleum products in the U.S. flag trade. The company serves independent oil traders, refinery operators, and government entities.
On December 8, OSG announced that it had exercised options to extend its six bareboat charter agreements with American Shipping Company ASA for an additional three-year term commencing in December 2023.
“We believe the market continues to support attractive commercial opportunities for these vessel leases to supplement the strong and stable cash flow generation from our niche businesses,” said Sam Norton, OSG’s President, and CEO.
On November 15, the company’s Board of Directors announced the purchase of $5 million shares of the company’s common stock from Cyrus Capital at $2.86 per share for a total of $14,300,000. The price paid in this share purchase equates to an enterprise value of roughly 4.5 times the expected adjusted EBITDA for 2022, an implied valuation considered very attractively for OSG.
OSG’s shipping revenues increased 30.9% year-over-year for the third quarter that ended September 30, 2022, to $123.06 million. The company’s net income came in at $13.25 million, compared to a net loss of $16.01 million in the year-ago period. Also, its EPS came in at $0.15, compared to a loss per share of $0.18 in the prior-year period.
In terms of trailing-12-month EV/Sales, OSG is currently trading at 1.63x, 15.8% lower than the industry average of 1.93x. Its trailing-12-month Price/Sales multiple of 0.58x is 55.2% lower than the industry average of 1.29x. In addition, the stock’s trailing-12-month Price/Book ratio of 0.71x compares to the industry average of 1.81x.
Over the past year, the stock has gained 52.1% to close the last trading session at $2.89.
OSG’s POWR Ratings reflect its promising outlook. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It has an A grade for Momentum and Quality and a B for Growth, Value, and Sentiment. In the 46-stock A-rated Shipping industry, it is ranked first. Click here to see OSG’s rating for Stability.
ARC Document Solutions, Inc. (ARC)
ARC provides digital printing and document-related services to customers across industries. The company also primarily resells printing, imaging, and related equipment to architectural, engineering, and construction firms and provides ancillary services.
It serves local restaurant owners, construction subcontractors, international retailers, regional energy companies, school districts, retail, technology, energy, education, hospitality, and public utilities.
On December 8, ARC’s board of directors declared a quarterly cash dividend of $0.05 per share, payable to its shareholders on February 28, 2023. It pays a $0.20 per share dividend annually, which translates to a 7.02% yield on the current price. Its four-year average dividend yield is 2.02%.
For the third quarter ended September 30, 2022, ARC’s net sales increased 1% year-over-year to $73.14 million. Its income from operations grew 16.2% from the year-ago period to $5.72 million. ARC’s net income came in at $3.71 million, representing an 18.1% year-over-year increase, while its adjusted EPS increased 12.5% year-over-year to $0.09.
In terms of trailing-12-month P/E, ARC is currently trading at 10.56x, 42.9% lower than the industry average of 18.49x. Its trailing-12-month EV/Sales multiple of 0.62x is 62.3% lower than the industry average of 1.64x. In addition, the stock’s trailing-12-month EV/EBIT and EV/EBITDA ratios of 9.49x and 4.52x compare with industry averages of 16.49x and 11.80x, respectively.
The stock has gained 20.3% over the past three months to close the last trading session at $2.85.
ARC’s POWR Ratings reflect solid prospects. The stock has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
It also has an A grade for Value, Sentiment, and Quality. It is ranked first among 41 stocks in the B-rated Outsourcing – Business Services industry. Click here to see the additional ratings of ARC for Growth, Momentum, and Stability.
YEXT shares were trading at $6.41 per share on Friday afternoon, down $0.00 (0.00%). Year-to-date, YEXT has declined -35.38%, versus a -18.80% 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.
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