Stocks have had a great start to 2023, with optimism fueled by the recent slowdown in the Fed’s rate increases, moderating inflation, and the possibility of a pause in hikes in the second half of the year.
The Federal Reserve raised interest rates by 25 basis points (bps) at its first meeting of 2023, pushing its key policy rate to 4.5%-4.75%. Noting progress and developments over the past few weeks, Fed Chairman Jerome Powell acknowledged that “the disinflationary process has begun.” Meanwhile, investors cheered over the strong hints that the Fed is nearing the end of its hiking cycle.
Also, the Consumer Price Index (CPI) rose 6.4% in January, reflecting that inflation continued to drop from its painful highs in June last year. However, price levels remain stubbornly high and well above the Fed's long-term price stability target of 2%.
Moreover, the January jobs data revealed that employers added a robust 517,000 jobs, exceeding the 187,000 market estimate, and the unemployment rate fell to 3.4%, a 53-year low. The labor market’s astonishing strength highlights that the central bank has more work to do in taming inflation, and interest rates could climb higher in the coming months.
Continued rate hikes could push the economy into a recession and induce further volatility in the near future. Amid this backdrop, investors could invest in fundamentally strong stocks General Motors Company (GM), Biogen Inc. (BIIB), and MasterCraft Boat Holdings, Inc. (MCFT) now without any hesitation.
General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.
On February 9, GM and GlobalFoundries Inc. (GFS) announced a strategic, long-term agreement to establish a dedicated capacity corridor exclusively for GM’s chip supply. This agreement should help GM reduce the number of unique chips required to power its complex, tech-heavy vehicles.
On January 31, Lithium Americas Corp. (LAC) and GM announced that they would jointly invest in developing the Thacker Pass mine in Nevada, with GM investing $650 million in LAC. It is the most significant investment by an automaker to produce battery raw materials. The lithium carbonate from Thacker Pass is expected to be used in GM’s Ultium battery cells.
In terms of forward non-GAAP P/E, GM is trading at 6.98x, 52.8% lower than the industry average of 14.79x. Likewise, its forward Price/Sales multiple of 0.37 is 61.4% lower than the industry average of 0.96.
For the fiscal fourth quarter that ended December 31, 2022, GM’s revenue increased 28.4% year-over-year to $43.11 billion. Its net income attributable to stockholders increased 14.8% year-over-year to $2 billion. In addition, its adjusted EPS came in at $2.12, representing a 57% increase from the year-ago quarter.
The stock’s EBITDA grew at a CAGR of 11.8% over the past three years. Its EBIT grew at a CAGR of 23% over the past three years. Moreover, its revenue grew at a CAGR of 4.5% over the past three years.
GM’s revenue for the quarter ending March 31, 2023, is expected to increase 9.1% year-over-year to $39.24 billion. Its EPS for the quarter ending June 30, 2023, is expected to increase 41.4% year-over-year to $1.61. The company has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
Over the past month, the stock has gained 18.1% to close the last trading session at $43.10.
GM’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to 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, and Sentiment. Within the Auto & Vehicle Manufacturers industry, it is ranked #19 out of 61 stocks.
Click here to see the additional POWR Ratings of GM for Momentum, Stability, and Quality.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. It offers TECFIDERA, AVONEX, PLEGRIDY, FAMPYRA, etc., for treating MS; SPINRAZA for SMA treatment; ADUHELM for treating Alzheimer’s; and FUMADERM for the treatment of severe plaque psoriasis.
On January 29, 2023, BIIB and Eisai Co., Ltd. announced that an application for manufacturing and marketing approval for LEQEMBI (lecanemab) received Priority Review status in Japan. Also, on January 6, lecanemab was granted accelerated approval for the treatment of Alzheimer’s Disease (AD) by the U.S. Food and Drug Administration (FDA).
In the same month, BIIB and Alcyone Therapeutics announced their license and collaboration agreement to evaluate a novel device to improve patient experience and access to neurological ASO therapies.
Through this agreement, BIIB aims to leverage the ThecaFlex DRx system to improve the patient treatment experience and accessibility for a broader population suffering from neurological disorders, such as Spinal Muscular Atrophy (SMA) and Amyotrophic Lateral Sclerosis (ALS).
In the fourth quarter that ended December 31, 2022, BIIB’s income before income tax expense and equity in loss of investee, net of tax, increased 49.1% year-over-year to $603.80 million. The total cost and expenses declined 16.7% year-over-year to $1.94 billion.
Net income attributable to BIIB improved 49.5% from the year-ago value to $550.40 million, while its EPS came in at $3.79, representing a 51.6% year-over-year increase.
In terms of forward non-GAAP P/E, BIIB is trading at 17.46x, 12% lower than the industry average of 19.84x. Its forward EV/EBITDA multiple of 11.93 is 11.3% lower than the industry average of 13.45. In addition, BIIB’s forward EV/EBIT ratio of 14.28 is 17.6% lower than the industry average of 17.33.
Analysts expect BIIB’s EPS to increase 4.5% year-over-year to $16.25 in the fiscal year 2024 (ending on December 31). BIIB surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock’s tang book value grew at a CAGR of 12.6% over the past three years. Shares of BIIB have gained 36.9% over the past nine months to close the last trading session at $271.53.
BIIB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and a B for Growth, Sentiment, and Quality. It is ranked #5 out of 407 stocks in the Biotech industry. Click here to see the other ratings of BIIB (Momentum and Stability).
MasterCraft Boat Holdings, Inc. (MCFT)
MCFT is a designer, manufacturer, and marketer of recreational powerboats. The company operates through its four broad segments MasterCraft; Crest; NauticStar; and Aviara.
On November 2, 2022, MCFT announced an expansion of its popular entry-level NXT lineup with the all-new 2023 NXT21 and NXT23. The new models deliver best-in-class wave performance, added storage, spacious hybrid bow design, and standard telematics.
George Steinbarger, Chief Revenue Officer at MCFT, said, “Since the introduction of the NXT line in 2015, consumers have enjoyed the MasterCraft promise of high-quality, high-performance towboats at an entry-level offering.”
In terms of forward non-GAAP P/E, MCFT is trading at 7.49x, 49.3% lower than the industry average of 14.79x. Likewise, its forward EV/EBITDA and EV/EBIT multiples of 4.96 and 5.61 are 50.3% and 59.4% lower than the industry averages of 9.98 and 13.82, respectively.
For the fiscal 2023 second quarter that ended January 1, 2023, MCFT’s net sales increased 10.2% year-over-year to $159.19 million. The company’s adjusted EBITDA grew 9.8% from the year-ago value to $29.82 million.
Its operating income increased 12% year-over-year to $26.46 million, while its adjusted net income rose 11% from the prior-year value to $21.27 million. Also, its adjusted EPS came in at $1.20, up 18.8% year-over-year.
MCFT’s EBITDA grew at a CAGR of 24% over the past three years. Its EBIT grew at a CAGR of 25.5% over the past three years. Its EPS grew at a CAGR of 47% over the same period.
The consensus EPS estimate of $4.57 for the fiscal year 2023 (ending June 2023) represents a marginal improvement year-over-year. moreover, its EPS is expected to increase by 10% per annum over the next five years. The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has declined 45% to close the last trading session at $34.22.
MCFT’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. It has a B grade for Value, Sentiment, and Quality.
Out of 37 stocks in the Athletics & Recreation industry, it is ranked #2. To see additional POWR Ratings for Growth, Momentum, and Stability for MCFT, click here.
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GM shares were trading at $42.24 per share on Friday morning, down $0.86 (-2.00%). Year-to-date, GM has gained 25.56%, versus a 5.70% 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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