Wall Street is in a correction mode, with major benchmark stock indexes consistently ending the weeks in the red on concerns over the consequences of the central bank’s aggressive monetary policy tightening to tame the surging inflation.
The S&P 500 lost 5.8% last week, marking its biggest weekly loss since March 2020, when the market was witnessing a free fall due to the COVID-19 outbreak. Last week, the Fed hiked interest rates by 75 basis points, the highest increase since 1994, and indicated continued tightening ahead. Many analysts expect the rate hikes to push the economy into a recession.
According to Nomura economists Aichi Amemiya and Robert Dent, "With rapidly slowing growth momentum and a Fed committed to restoring price stability, we believe a mild recession starting in Q4 2022 is now more likely than not."
Growth companies have been pounded throughout this market sell-off, as they appear less appealing to investors in a rising interest rate environment. However, QuidelOrtho Corporation (QDEL), Veritiv Corporation (VRTV), and Valhi, Inc. (VHI) could rebound in the coming months based on their solid growth attributes.
The current discounted valuations of these stocks offer a solid opportunity to add them to one’s portfolio.
QuidelOrtho Corporation (QDEL)
Headquartered in San Diego, California, QDEL provides various in vitro diagnostics products internationally. The company's product portfolio covers a range of point-of-care tests for infectious diseases, critical cardiac health and autoimmune biomarkers, and clinical and at-home products to detect COVID-19.
Last month, QDEL completed the transaction combining QDEL and Ortho Clinical Diagnostics Holdings plc (Ortho), creating QuidelOrtho, a leader in vitro diagnostics company. The new company generated more than $3.5 billion in combined revenues in 2021 and has approximately 6,000 employees.
QDEL's revenue has grown at a CAGR of 66.8% over the past three years. Furthermore, the company's EBITDA has grown at a CAGR of 116.8% over the past three years.
In terms of forward non-GAAP P/E, QDEL is currently trading at 6.92x, 61.8% lower than the 18.10x industry average. Also, in terms of its forward EV/Sales, the stock is currently trading at 1.87x, 44.5% lower than the 3.36x industry average.
During the first quarter ending March 31, 2022, total revenues increased 167% year-over-year to $1.00 billion. Its operating income grew 176.8% from its year-ago value to $620.66 million, while its net income improved 169.5% from its prior-year quarter to $479.94 million. The company’s EPS rose 176.5% year-over-year to $11.31.
Analysts expect QDEL's revenue to increase 180% year-over-year to $494.48 million for the second quarter ending June 2022. The consensus EPS estimate of $2.95 represents a 293.6% improvement year-over-year for the second quarter ending June 2022. Moreover, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has lost 11.8% over the past month.
QDEL's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock also has an A grade for Value and Growth and a B for Quality. Within the D-rated Medical - Diagnostics/Research industry, it is ranked #10 of 53 stocks.
To see additional POWR Ratings for Sentiment, Stability, and Momentum for QDEL, click here.
Veritiv Corporation (VRTV)
VRTV functions as a business-to-business provider of value-added packaging products and services, facility solutions, and print and publishing products and services internationally.
The Packaging segment provides custom and standard packaging solutions; the Facility Solutions segment sources and sells cleaning, break-room, and other supplies; the Publishing segment sells and distributes coated and uncoated commercial printing papers to publishers and retailers, converters, printers, and specialty businesses.
VRTV's EBITDA has grown at a CAGR of 49.1% over the past three years. Furthermore, the company's EBIT has grown at a CAGR of 69% over the past three years.
In terms of forward Price/Sales, VRTV is currently trading at 0.24x, 79.4% lower than the 1.17x industry average. Also, in terms of its forward EV/Sales, the stock is currently trading at 1.12x, 26.3% lower than the 1.52x industry average.
In the first quarter ending March 31, 2022, VRTV's net sales increased 19.2% year-over-year to $1.86 billion. The company’s operating income grew 152.8% from its year-ago value to $87.20 million, while its net income improved 268.5% from its prior-year quarter to $78.50 million. The company's EPS rose 300% from its previous period to $5.12.
Analysts expect VRTV's revenue to increase 8% year-over-year to $1.79 billion for the second quarter ending June 2022. The consensus EPS estimate of $4.50 for the second quarter ending June 2022 represents a 177.7% improvement year-over-year. In addition, it has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in all of the trailing four quarters.
The stock has declined 15.3% over the past month.
It is no surprise that VRTV has an overall A rating, which equates to Strong Buy in our POWR Ratings system. VRTV has an A grade for Value and Growth and a B for Sentiment. Within the A-rated Industrial – Packaging industry, it is ranked #1 of 21 stocks.
Click here to see the additional POWR Ratings for VRTV (Momentum, Stability, and Quality).
Valhi, Inc. (VHI)
Headquartered in Dallas, Texas. VHI, Inc. is a subsidiary of Contran Corporation and is engaged in the chemicals, component products, and real estate management and development businesses in the Asia Pacific, Europe, North America, and internationally.
In April, VHI announced a multi-year regional licensing agreement of subsidiary Transforming Systems (TS) SHREWD suite of solutions with NHS England and NHS Improvement Midlands (NHSEI or the Customer). This transaction indicates a new customer sale for the company, with TS having engaged with NHSEI since July 2021. -,
VHI's revenue has grown at a CAGR of 9.6% over the past three years. Furthermore, the company's EBITDA has grown at the rate of 9.3% per annum over the past three years.
In terms of forward Non-GAAP P/E, VHI is currently trading at 4.53x, 55.7% lower than the 10.24x industry average. Also, in terms of its trailing-12-months EV/Sales, the stock is currently trading at 0.66x, 56.4% lower than the 1.50x industry average.
VHI’s total net sales amounted to $509.00 million for the first quarter ending March 31, 2022. Its total operating income came in at $51.30 million over the period, while its net income stood at $14.50 million. The company’s EPS amounted to $0.52 over the period.
The consensus EPS estimate of $2.01 for the second quarter ending June 2022. represents a 168% year-over-year growth. The company’s shares have surged 42.6% over the past three months and 50.8% year-to-date.
VHI's strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system. The stock has an A grade for Growth and Value and a B grade for Sentiment. In the A-rated Chemicals industry, it is ranked #1 of 92 stocks.
In total, we rate VHI on eight different levels. Beyond what we've stated above, we have also given VHI grades for Quality, Stability, and Momentum. Get all the VHI ratings here.
QDEL shares were trading at $101.42 per share on Tuesday morning, up $0.36 (+0.36%). Year-to-date, QDEL has declined -24.87%, versus a -21.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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