Although inflation has retreated significantly, it remains elevated enough to erode the spending power of consumers. Prices were 7.1% higher in November than they were a year ago.
Moreover, central bankers worldwide have warned to hold interest rates at higher levels for longer despite recent progress in the fight against inflation. As interest rates dampen the demand, it is expected to trigger a recession next year. However, according to a poll conducted by Reuters, the S&P 500 Index is expected to end 2023 at around 4,200 points level.
The market has declined significantly this year and may find it harder to stabilize in the near term. Therefore, amid such gloomy times, the best way to profit from the stock market is to load up solid stocks when they are trading at affordable prices, to what Warren Buffet describes best as being “greedy when others are fearful.”
Given the backdrop, we think investors could consider investing in fundamentally sound stocks United Microelectronics Corporation (UMC), Myers Industries, Inc. (MYE), The Hackett Group, Inc. (HCKT), and Mistras Group, Inc. (MG), which are currently trading at a discount.
United Microelectronics Corporation (UMC)
Headquartered in Hsinchu City, Taiwan, UMC is a global semiconductor foundry that operates through two segments: Wafer Fabrication and New Business. It offers high-quality IC fabrication services, focusing on logic and various specialty technologies to all electronics industry sectors.
On December 10, the company achieved the highest sustainability score among peers in the Dow Jones Sustainability Indices (DJSI). This year, UMC has been selected as a member of both the DJSI’s World Index and Emerging Markets Index.
On November 9, UMC launched the Supply Chain Greenhouse Gas (GHG) Inventory Initiative with an aim to cut supply chain emissions by 20% by 2030. By providing tools and resources for measuring and managing emissions, UMC targets to assist 500 suppliers in completing their GHG inventories.
UMC’s operating revenues increased 34.9% year-over-year to NT$75.39 billion ($2.46 billion) for the third quarter ended September 30, 2022. Its gross profit increased 73.6% year-over-year to NT$35.66 billion ($1.16 billion). The company’s net income increased 57.6% year-over-year to NT$27.34 billion ($890.58 million), while its EPS came in at NT$2.19, representing an increase of 53.1% year-over-year.
In terms of forward non-GAAP P/E, UMC is currently trading at 5.97x, 67.8% lower than the industry average of 18.51x. Its forward EV/Sales multiple of 1.44 is 42.1% lower than the industry average of 2.49. In addition, its forward EV/EBITDA multiple of 2.72 is 77.8% lower than the industry average of 12.24x.
Street expects UMC’s EPS and revenue for fiscal 2022 (ending December 31, 2022) to increase 42.9% and 18.8% year-over-year to $1.18 and $9.14 billion, respectively. Over the past three months, the stock has gained 13.1% to close the last trading session at $6.98.
UMC’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and Quality. UMC is ranked first out of 92 stocks in the B-rated Semiconductor & Wireless Chip industry. Click here to see the other ratings of UMC for Growth, Momentum, Stability, and Sentiment.
Myers Industries, Inc. (MYE)
MYE is a leading manufacturer of a wide range of polymer and metal products for industrial, agricultural, automotive, commercial, and consumer markets. It is engaged in the distribution of tire service supplies in Ohio. The company operates through two segments: Material Handling and Distribution.
On October 17, 2022, the company introduced a broad portfolio of reusable packaging solutions at Pack Expo 2022. The new set of solutions is expected to be highly demanded by various industries such as industrial manufacturing, food processing, retail/wholesale distribution, agriculture, and automotive, thereby boosting revenues.
MYE’s net sales increased 14% year-over-year to $228.06 million for the third quarter that ended September 30, 2022. Its adjusted operating income increased 75.7% year-over-year to $22.01 million, while its adjusted net income grew 76.9% from the prior-year value to $15.02 million.
The company’s adjusted EPS came in at $0.41, representing a 78.3% year-over-year increase. In addition, its adjusted EBITDA increased 57.2% year-over-year to $27.17 million.
In terms of forward EV/Sales, MYE is currently trading at 1.06x, 26.9% lower than the industry average of 1.45x. Its forward Price/Book multiple of 0.93 is 13.5% lower than the industry average of 1.08.
The consensus EPS estimate of $0.29 for the fiscal fourth quarter (ending December 2022) represents a 26.1% improvement year-over-year. The consensus revenue estimate of $220.63 million for the current quarter represents a 10.6% increase from the same period last year. The company has an impressive earnings surprise history, as it surpassed the EPS estimates in each of the trailing four quarters.
Shares of MYE have gained 33% over the past three months and 15.9% year-to-date to close the last trading session at $23.19.
MYE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
It has a B grade for Growth, Stability, Sentiment, and Quality. Within the A-rated Industrial - Manufacturing industry, it is ranked #2 out of 35 stocks. To see the other ratings of MYE for Value and Momentum, click here.
The Hackett Group, Inc. (HCKT)
HCKT operates as a strategic advisory and technology consulting firm. It offers best practice accelerators that provide web-based access to best practices, customized software configuration tools and best practice process flows, and advisor inquiry for fact-based advice on proven approaches and methods.
HCKT’s total revenue increased marginally year-over-year to $72.03 million for the third quarter ended September 30, 2022. Its operating income increased 23.1% year-over-year to $14.03 million. The company’s adjusted net income and adjusted net income per share came in at $11.84 million and $0.37, representing a 15.5% and 19.4% increase from the prior year's quarter.
In terms of forward non-GAAP P/E, HCKT is trading at 13.71x, 25.9% lower than the industry average of 18.51x. Its forward EV/Sales multiple of 1.61x is 35.5% lower than the industry average of 2.49x. In addition, the stock’s forward EV/EBIT and EV/EBITDA ratios of 8.87x and 6.95x compare with industry averages of 15.67x and 12.24x, respectively.
For the fiscal year ending December 31, 2022, Street expects HCKT’s revenue and EPS to increase 4.6% and 10.9% year-over-year to $291.70 million and $1.45, respectively. HCKT has surpassed EPS estimates in each of the trailing four quarters, which is impressive.
Over the past year, the stock has gained 17.1% to close the last trading session at $19.92.
HCKT has an overall A rating, which translates to Strong Buy in our proprietary rating system. Also, it has an A grade for Quality and a B for Stability and Sentiment. Among the nine stocks in the A-rated Outsourcing - Tech Services industry, HCKT is ranked first.
Beyond what we’ve stated above, we have also given HCKT grades for Growth, Value, and Momentum. Get all HCKT ratings here.
Mistras Group, Inc. (MG)
MG provides integrated solutions to protect technology-enabled assets. The company operates through three segments: Services; International; and Products and Systems.
On September 15, MG’s Sensoria, an innovative 24/7/365 wind blade monitor, announced a collaboration with Danish blade specialist Bladena to provide an innovative solution to help maximize offshore wind blade integrity and uptime. The collaboration focuses on providing the ever-growing offshore wind market with solutions for the critical structural challenges wind turbine blades face in harsh environmental conditions.
For the fiscal third quarter ending September 30, MG’s revenue increased 2.2% year-over-year to $178.46 million. Its gross profit grew 3% from the year-ago value to $53.78 million. During the same period, the non-GAAP net income attributable to MG came in at $5.01 million, up 40.5% year-over-year, while its non-GAAP EPS amounted to $0.16 per share, representing a 33.3% increase from the prior-year quarter.
In terms of forward EV/Sales, MG is trading at 0.56x, 65.7% lower than the industry average of 1.63x. Its forward Price/Sales multiple of 0.22 is 82.6% lower than the industry average of 1.25. In addition, the stock’s forward EV/EBITDA ratio of 7.22x compares to the industry average of 10.59x.
Analysts expect MG’s revenue and EPS for the current fiscal year (ending December 31, 2022) to increase 1.8% and 28.2% year-over-year to $689.56 million and $0.17, respectively. The stock has gained 31.3% over the past month to close the last trading session at $5.04.
MG’s solid prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Sentiment. Within the B-rated Outsourcing - Business Services industry, it is ranked #5 of 43 stocks.
To see the additional POWR Ratings of MG for Momentum, Stability, and Quality, click here.
UMC shares were trading at $6.77 per share on Thursday afternoon, down $0.21 (-3.01%). Year-to-date, UMC has declined -42.14%, versus a -19.10% 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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