Easing inflation numbers is boosting investors’ confidence. According to Goldman Sachs (GS) analyst Manuel Abacasis, the economy is experiencing a healthy deceleration, not a recession. Moreover, Wall Street expects a slower tightening by the Fed.
Given the series of positive economic data, the economy might be able to withstand further rate hikes without tipping into a recession. And with equity markets rebounding, it might be better to stay invested instead of waiting on the sidelines.
Mid-cap companies are assumed to have successfully navigated the high-risk phase associated with startups. For investors, this might mean a lower level of investment risk. Also, these companies offer plenty of upside potential.
Moreover, the mid-cap seems to be enjoying favorable investor sentiments, as evident from iShares Core S&P Mid-Cap ETF (IJH) 14.2% returns over the past month, outperforming the S&P 500’s 11.8% gains over this period.
Given this backdrop, we believe fundamentally strong mid-cap stocks Acuity Brands, Inc. (AYI), Hugo Boss AG (BOSSY), and Progress Software Corporation (PRGS) might be solid buys now to garner substantial returns this year.
Acuity Brands, Inc. (AYI)
AYI provides lighting and building management solutions in North America and internationally. The company operates through two segments, Acuity Brands Lighting and Lighting Controls. It has a market capitalization of $6.11 billion.
On June 29, AYI declared a quarterly dividend of 13 cents per share, which was payable to shareholders on August 1. This reflects upon the company’s ability to return value to its shareholders.
AYI’s net sales increased 17.9% year-over-year to $1.06 billion in the third quarter ended May 31. Its adjusted operating profit grew 19% from the year-ago value to $162.80 million, while its adjusted net income improved 20.8% year-over-year to $121.30 million. The company’s adjusted earnings per share increased 27.1% from its year-ago value to $3.52.
The consensus EPS estimate of $3.71 for the fourth fiscal quarter ending August 2022 indicates a 13.5% improvement year-over-year. The consensus revenue for the same period is expected to grow 11.2% from the prior-year period to $1.10 billion.
The stock has gained 12% over the last three months and 1.9% over the past five days to close its last trading session at $186.80.
AYI’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AYI is rated an A in Quality and a B in Growth and Value. Within the Home Improvement & Goods industry, it is ranked #2 out of 22 stocks. To see additional POWR Ratings for Momentum, Stability, and Sentiment for AYI, click here.
Hugo Boss AG (BOSSY)
BOSSY, headquartered in Metzingen, Germany, develops, markets, and distributes clothes, shoes, and accessories for men and women. Under its BOSS and HUGO brands, the company offers business wear, casual wear, shoes and accessories, and licensed products, as well as children’s fashion products. It has a market capitalization of $4.06 billion.
On July 19, BOSSY announced an extension of its BOSS Kidswear license agreement with the CWF Group to the HUGO Brand via HUGO BOSS Trade Mark Management GmbH & Co. KG. The exclusive license is expected to cover the design, production, and distribution of a HUGO Kids collection. The license extension should benefit the company.
BOSSY’s sales came in at €878 million ($890.26 million) for the second quarter of 2022, representing a 39.6% year-over-year growth. Its EBIT grew 138.1% from the prior-year quarter to €100 million ($101.40 million), while its net income rose 140% from the same period last year to €60 million ($60.84 million). EPS increased 144.1% from the prior-year period to €0.83.
Analysts expect BOSSY’s revenue for the third quarter ending September 2022 to be $884.55 million, indicating a 1.3% year-over-year growth.
BOSSY has gained 11.7% over the past three months and 5.1% over the past month to close its last trading session at $11.68.
It is no surprise that BOSSY has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The stock has an A grade for Quality and a B for Growth, Value, and Stability. It is ranked #2 out of 67 stocks in the Fashion & Luxury industry.
Beyond what we’ve stated above, we have also given BOSSY grades for Momentum and Sentiment. Get all BOSSY ratings here.
Progress Software Corporation (PRGS)
PRGS engages in the development, deployment, and management of business applications. The company offers its products to end users, independent software vendors, original equipment manufacturers, and system integrators. It has a market capitalization of $2.22 billion.
On June 21, PRGS’ board of directors announced a dividend of $0.175 per share, payable on September 15. This reflects upon the cash generation ability of the company. Anthony Folger, CFO, said, “Despite the recent challenges in the global economy, our business continues to perform well across virtually all product lines.”
In June, PRGS announced the release of Progress Flowmon, a network visibility and security solution. The solution is expected to bolster the company’s capabilities in the hybrid cloud environment space.
For the fiscal second quarter ended May 31, 2022, PRGS’ adjusted revenues increased 16.8% year-over-year to $150.88 million. Its non-GAAP income from operations grew 23.3% from the prior-year period to $61.30 million. Non-GAAP net earnings and non-GAAP net earnings per share came in at $45.89 million and $1.04, up 25.7% and 26.8% from the prior-year period.
Street EPS estimate for the fiscal fourth quarter (ending November 2022) of $1.10 reflects a rise of 20.1% year-over-year. Likewise, Street revenue estimate for the same quarter of $165.19 million indicates an improvement of 14.9% from the prior-year period. Additionally, PRGS has topped consensus EPS estimates in each of the trailing four quarters.
Over the past year, PRGS’ stock has gained 16.4% to close its last trading session at $51.13. It has gained 5.9% year-to-date.
This promising prospect is reflected in PRGS’ POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. PRGS has an A grade for Quality and a B grade for Growth and Value. It is ranked #3 out of 154 stocks in the Software - Application industry.
Click here to see the additional POWR Ratings for PRGS (Momentum, Stability, and Sentiment).
AYI shares were trading at $182.95 per share on Friday afternoon, down $3.85 (-2.06%). Year-to-date, AYI has declined -13.40%, versus a -10.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
3 Mid-Cap Stocks to Buy for Impressive Returns This Year StockNews.com
