A recession is anticipated to materialize later this year owing to the Fed’s continuing hawkish stance and the U.S. debt default crisis. Amid market volatilities triggered by such headwinds, investing in value stocks could pose some benefits.
Given this backdrop, let us probe into Genmab A/S (GMAB), International Consolidated Airlines Group S.A. (ICAGY), and InterDigital, Inc. (IDCC), currently trading at discounted valuations.
In the past three years, the global economy has grappled with two major shocks of COVID-19 pandemic and geopolitical turmoil. Economic situations worsened further amid the stubbornly high inflation, which coerced the Fed to tighten its monetary policy significantly.
As 2022 wrapped up, 2023 kick-started with a fresh bout of optimism about a Fed pivot and markets performing comparatively well. However, investors’ hopes were dashed by the shocking crisis in regional banks amid the Fed’s rate hikes, resulting in a credit crunch.
The banking turmoil is far from over; adding fuel to the fire are the ballooning worries among experts that the U.S. debt default crisis could shatter the $24 trillion market for Treasury debt, cause financial markets to freeze, and create a global financial crisis.
Danny Blanchflower, an economics professor at Dartmouth University and former interest rate-setter at the Bank of England, said, “What happens if the greatest economic monolith in the world can’t pay its bills? The consequences are frightful.”
Given such economic headwinds and market volatilities, unlikely to diminish anytime soon, investing in undervalued stocks of fundamentally resilient companies has been gaining a lot of steam.
Furthermore, the ‘Oracle of Omaha,’ Warren Buffet, recently acknowledged that in a changing world, value investing opportunities thrive. Against this backdrop, it could be an opportune time for investors to buy quality value stocks GMAB, ICAGY, and IDCC.
Genmab A/S (GMAB)
Headquartered in Copenhagen, Denmark, GMAB develops antibody therapeutics for the treatment of cancer and other diseases, primarily in Denmark.
On April 17, GMAB and argenx (ARGX) entered a collaborative agreement to discover, develop, and market new therapeutic antibodies with applications in immunology and cancer therapeutic domains. This should help the companies to improve their expertise and maximize their chances of developing innovative therapeutic antibodies for autoimmunity or cancer.
GMAB’s forward Price/Book of 0.55x is 79.8% lower than the industry average of 2.72x. Moreover, its trailing-12-month PEG multiple of 0.28 is 78% higher than the industry average of 1.29.
GMAB’s trailing-12-month gross profit margin of 100% is 79.3% higher than the industry average of 55.78%. Its trailing-12-month EBITDA margin of 43.45% is significantly higher than the industry average of 1.93%.
GMAB’s revenue increased 34.7% year-over-year to DKK2.85 billion ($413.91 million) for the fiscal first quarter that ended March 31, 2023. GMAB’s cash flow from operating activities for the same quarter grew 451.1% year-over-year to DKK3.24 billion ($469.17 million).
The company’s total assets and cash and cash equivalents amounted to DKK30.39 billion ($4.41 billion) and DKK12.29 billion ($1.78 billion) for the period that ended March 31, 2023, compared to DKK30.29 billion ($4.39 billion) and DKK9.89 billion ($1.43 billion) for the period that ended December 31, 2022, respectively.
Analysts expect GMAB’s revenue to increase 29.6% year-over-year to $567.61 million in the fiscal second quarter ending June 2023. Its EPS is expected to grow 8.6% year-over-year to $0.24 in the same quarter. Moreover, GMAB topped consensus revenue estimates in all the trailing four quarters, which is impressive.
GMAB’s stock has gained 33.8% over the past year to close its last trading session at $40.62. Over the past three months, the stock has gained 8.1%.
GMAB’s POWR Ratings reflect this promising outlook. 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.
GMAB has a B grade for Growth and Value. Within the Biotech industry, it is ranked #29 out of 373 stocks.
Click here for the additional POWR Ratings for Momentum, Sentiment, Stability, and Quality for GMAB.
International Consolidated Airlines Group S.A. (ICAGY)
Based in Harmondsworth, the United Kingdom, ICAGY is an airline company primarily engaged in the provision of passenger and cargo transportation services globally. It also offers services for ground handling, trustee, storage, custody, and the construction of airport infrastructure.
ICAGY’s forward EV/EBITDA of 4.18x is 59.8% lower than the industry average of 10.41x. Moreover, its forward non-GAAP P/E multiple of 5.80 is 63.8% higher than the industry average of 16.04.
ICAGY’s trailing-12-month cash from operations of $5.18 billion is significantly higher than the industry average of $214.60 million. Likewise, its trailing-12-month ROCE of 79.20% is 472.7% higher than the industry average of 13.83%.
ICAGY’s total revenue increased 71.4% year-over-year to €5.89 billion ($6.36 billion) for the fiscal first quarter that ended March 31, 2023. Its operating profit came in at €9 million ($9.72 million), compared to an operating loss of €718 million ($775.55 million) in the year-ago quarter.
Its cash, cash equivalents, and interest-bearing deposits stood at €11.37 billion ($12.28 billion), up 18.4% year-over-year for the same quarter. Moreover, its EBITDA before exceptional items for March 31, 2023, stood at €4.03 billion ($4.35 billion), compared to €3.33 billion ($3.59 billion) as of December 31, 2022.
For the full year 2023, the company expects operating profit before exceptional items to be higher than the top end of its previous guidance of €1.8 billion to €2.3 billion. ICAGY also expects the net debt on December 31, 2023, to be better than previous guidance and in line with its profit’s outperformance.
Analysts expect ICAGY’s revenue and EPS to increase 33.3% and 338.8% year-over-year to $8.06 billion and $0.24, respectively, in the fiscal second quarter (ending June 2023). It surpassed the EPS and revenue estimates in three of the trailing four quarters, which is excellent.
Shares of ICAGY have gained 16.5% over the past year and 3% over the past three months to close its last trading session at $3.81.
ICAGY’s robust outlook is reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
It has a B grade for Growth and Value. In the 27-stock B-rated Airlines industry, it is ranked #11.
To see additional POWR Ratings for ICAGY for Momentum, Stability, Sentiment, and Quality, click here.
InterDigital, Inc. (IDCC)
IDCC designs and develops technologies to enable and enhance wireless communications. The company provides technology solutions, including 3G, 4G, 5G, and IEEE 802-related products. It also provides video coding and transmission technologies; and engages in the research and development of artificial intelligence.
On May 15, IDCC signed a new patent license agreement with Alps Alpine Co., Ltd., and the deal covers Alps Alpine’s range of devices under IDCC’s standard essential patents related to HEVC.
In addition to demonstrating how IDCC’s innovation is applied across a range of devices, its long history of research in the video space implies both companies’ asset portfolio strength in HEVC and other leading codecs. The collaboration should bode well for IDCC.
The company completed its modified Dutch auction tender offer for 2.7 million share repurchases for an aggregate cost of $199.9 million, excluding fees, expenses, and excise tax. The company repurchased $24.7 million, or 0.3 million shares, during the period from April 1, 2023, through April 30, 2023.
On March 29, IDCC’s board of directors declared a regular quarterly dividend of $0.35 per share on its common stock, which was paid to the shareholders on April 26, 2023. This cumulates to an annual dividend of $1.40 per share and yields 1.67% on the current share price. Its four-year average dividend yield is 2.33%.
In terms of forward EV/EBITDA, IDCC is trading at 6.58x, 53.5% lower than the industry average of 14.15x. Its forward non-GAAP P/E multiple of 10.62 is 50.4% lower than the 21.43 industry average.
IDCC’s trailing-12-month net income margin of 32.38% is significantly higher than the industry average of 2.36%. Likewise, its trailing-12-month ROCE and ROTA of 26.35% and 10.35% are significantly higher than the industry averages of 0.63% and 0.08%, respectively.
IDCC’s total revenue has increased 99.7% year-over-year to $202.37 million in its fiscal first quarter that ended March 31, 2023. Its income from operations rose 295.1% year-over-year to $119.26 million. Its adjusted EBITDA improved 179.5% year-over-year to $154.81 million.
In addition, the company’s non-GAAP net income and non-GAAP net income per share were $123.62 million and $4.21, registering increases of 301.3% and 325.3% year-over-year, respectively.
Analysts expect IDCC’s revenue and EPS for the fiscal year ending December 2023 to come in at $522.10 million and $7.85, indicating 14.1% and 107.9% increases year-over-year, respectively. The company topped the consensus revenue in each of the trailing four quarters.
Over the past year, shares of IDCC have gained 28.6%. Over the past month, it grew 23% to close its last trading session at $83.33.
IDCC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of B, which translates to Buy in our proprietary rating system.
IDCC has a B grade for Growth, Value, Sentiment, and Quality. Within the 18-stock Telecom – Domestic industry, it is ranked second.
IDCC’s additional POWR Ratings for Momentum and Stability can be accessed here.
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GMAB shares were trading at $40.62 per share on Monday morning, up $0.09 (+0.22%). Year-to-date, GMAB has declined -4.15%, versus a 10.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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