Although inflation has been on a continuous decline, growing fears of recession have weighed heavily on market sentiment. Amid this, investing in quality stocks with strong fundamentals, such as Glencore plc (GLNCY), Fortive Corporation (FTV), and Koç Holding A.S. (KHOLY), could help overlook the short-term bumps.
U.S. stocks rallied as investors cheered the latest data indicating the slowing pace of inflation. The Producer Price Index (PPI) declined by 0.5% month over month in March versus economists’ expectations for prices to be flat.
The PPI data confirmed the easing inflation trend from March’s Consumer Price Index (CPI) report, which rose just 0.1% month-over-month in March and 5% from a year ago, below estimates of 0.2% and 5.1%, respectively.
The continued decline in inflationary pressures has bolstered hopes that the Fed could be ending its interest rate hike campaign in the near future. However, the latest Fed minutes indicate that the recent banking crisis could push the economy into a recession later this year.
Adding to this, the International Monetary Fund (IMF) recently slashed its global growth forecast to 2.8% for this year, down 0.1 percentage point from the previous projection in January. While uncertainties prevail in the market, it could be wise to invest in fundamentally sound stocks GLNCY, FTV, and KHOLY.
Let’s look at the stocks in detail:
Glencore plc (GLNCY)
GLNCY is a global diversified natural resources company and a major producer, recycler, and marketer of metals, minerals, and energy products. Its key strategic goal is accelerating the circularity of critical minerals, especially those needed for the transition to a low-carbon economy.
On April 11, GLNCY, FCC Ámbito, and Iberdrola entered into a partnership to provide lithium-ion battery circularity solutions at scale for Spain and Portugal. These parties intend to combine their expertise to offer comprehensive recycling and second-life solutions for lithium-ion batteries, both from gigafactory production scrap and end-of-life batteries.
This alliance strengthens the supply of critical metals in support of the energy transition and the world’s net zero ambition, as well as assists the company in growing its recycling business into new markets.
In terms of forward non-GAAP EV/Sales, GLNCY is trading at 0.43x, 71.2% lower than the industry average of 1.50x. The stock’s forward EV/EBITDA of 4.41x is 41.6% lower than the 7.55x industry average. Furthermore, the stock’s forward Price/Sales of 0.33x is 71.2% lower than the 1.14x industry average.
The stock’s trailing-12-month ROCE, ROTC, and ROTA of 38.77%, 20.34%, and 13.06% compare with the industry averages of 11.61%, 6.89%, and 5.34%, respectively.
GLNCY’s net revenue increased 25.6% year-over-year to $255.98 billion in the fiscal year that ended December 31, 2022. Its adjusted EBITDA grew 59.7% from the prior year’s value to $34.06 billion, while its attributable net income for the year came in at $17.32 billion, representing a 248.2% year-over-year improvement. In addition, the company’s EPS increased 250% year-over-year to $1.33.
GLNCY’s revenue and EBITDA grew at CAGRs of 6% and 46.2% over the past three years. Likewise, its EBIT grew at a CAGR of 113.3% during the same period.
Shares of GLNCY have gained 25.5% over the past nine months to close the last trading session at $12.19.
GLNCY’s promising outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
It has an A grade for Momentum and a B for Stability, Sentiment, and Quality. In the 41-stock Miners - Diversified industry, it is ranked #2.
Beyond what we stated above, we also have GLNCY’s ratings for Growth and Value. Get all GLNCY ratings here.
Fortive Corporation (FTV)
FTV primarily designs, develops, manufactures, markets, and services professional and engineered products, software, and services worldwide. Its segments include Intelligent Operating Solutions; Precision Technologies; and Advanced Healthcare Solutions.
On April 6, the company declared a regular quarterly dividend of $0.07 per share of its common stock, par value $0.01 per share, payable on June 30, 2023. FTV’s four-year average dividend yield is 0.40%, and its current dividend of $0.28 translates to a 0.42% yield on prevailing prices. Its dividends have grown at a 6.2% CAGR over the past three years and a 3.6% CAGR over the past five years.
The stock’s forward Price/Book multiple of 2.31 is 3% lower than the industry average of 2.38x.
In terms of trailing-12-month levered FCF margin, the stock’s 19.60% is 346.8% higher than the 4.39% industry average. Also, its trailing-12-month net income margin and EBITDA margin of 12.96% and 25.61% compare with the industry averages of 6.54% and 13.21%, respectively.
FTV’s sales for the fiscal fourth quarter that ended December 31, 2022, increased 11.3% year-over-year to $1.53 billion. Its gross profit grew 12.4% from the year-ago value to $892.50 million, while its operating profit increased 44.3% from the prior-year quarter to $290.90 billion.
The company’s adjusted net earnings from continuing operations amounted to $313 million and $0.88 per share, up 8.7% and 11.4% year-over-year, respectively.
Analysts expect FTV’s EPS and revenue for the fiscal first quarter (ended March 31, 2023) to increase 4.4% and 3.3% year-over-year to $0.73 and $1.42 billion, respectively. Moreover, it surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is promising.
FTV’s revenue and EBITDA have increased at CAGRs of 8.5% and 16.8%, respectively, over the past three years, while its levered FCF has grown at a 56.2% CAGR.
The stock has gained 23.9% over the past nine months and 13.7% over the past year to close the last trading session at $67.23.
FTV’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
It also has a B grade for Growth, Momentum, Stability, Sentiment, and Quality. FTV is ranked #19 out of 90 stocks in the B-rated Industrial - Equipment industry. Click here to see FTV’s rating for Value.
Koç Holding A.S. (KHOLY)
KHOLY is a Turkey-based holding company that operates in Energy, Automotive, Consumer Durables, Finance, and Other business businesses through its subsidiaries.
On March 1, the company strengthened its existing Tofaş joint venture with Stellantis N.V. (STLA) by expanding its partnership in Türkiye through the efficient offer of best-in-class products and services to customers and partners. This strategic collaboration is expected to bring efficient, customer-centric, and industry-leading products to Turkish customers.
On February 21, KHOLY signed a non-binding Memorandum of Understanding (MoU) with Ford and LG Energy Solution to build one of the largest commercial electric vehicle battery cell production facilities near Ankara, Turkey, strengthening the foundation for Ford’s electric future in Europe. Analysts expect such collaborations to strengthen the company’s overall business.
In terms of forward non-GAAP Price/Sales, KHOLY is trading at 0.23x, 81.8% lower than the industry average of 1.27x. Likewise, the stock’s forward EV/Sales and EV/EBITDA of 0.56x and 3.10x are 64.6% and 70.6% lower than the industry averages of 1.60x and 10.52x, respectively.
During the fiscal year that ended on December 31, 2022, KHOLY’s total revenue increased 160.1% year-over-year to TL901.86 billion ($46.64 billion). Its gross profit grew 183.3% from the year-ago value to TL226.84 billion ($11.73 billion). The company’s operating profit and profit for the period came in at TL149.35 billion ($7.72 billion) and TL118.22 billion ($6.11 billion), representing an increase of 330.7% and 351.5% year-over-year, respectively.
For the fiscal year ending December 2024, analysts expect KHOLY’s revenue to increase 29.7% year-over-year to $60.51 billion. The company surpassed the revenue estimates in each of the trailing four quarters, which is excellent. KHOLY’s revenue has grown at 80.4% and 55.6% CAGRs over the past three and five years, respectively. Also, its EPS has grown at a 151.5% CAGR over the past three years.
The stock’s trailing-12-month levered FCF margin of 10.06% is 129.2% higher than the 4.39% industry average. Likewise, its trailing-12-month ROCE and ROTC of 65.55% and 17.91% are 373.9% and 154.6% higher than the industry averages of 13.83% and 7.03%, respectively.
Over the past nine months, the stock has gained 102.3% to close the last trading session at $20.90.
KHOLY’s strong fundamentals are reflected in its POWR Ratings. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Growth, Stability, Sentiment, and Quality. Out of 78 stocks in the A-rated Industrial - Services industry, it is ranked first. Get all KHOLY’s ratings here.
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GLNCY shares were trading at $12.18 per share on Friday morning, down $0.01 (-0.08%). Year-to-date, GLNCY has declined -8.56%, versus a 8.06% 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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