The labor market tightness has strengthened the case for the Federal Reserve to maintain its aggressive stance. Moreover, in the minutes of its December meeting, the Central Bank stated its determination to ignore market opinions and keep raising interest rates until inflation returns to the desired 2% level.
On the other hand, the head of the International Monetary Fund cautioned that this year would be “tougher than the year we leave behind,” with a third of the world’s economy anticipated to be in recession.
On the bright side, according to the Conference Board, the consumer confidence index rose to 108.3 in December 2022. Moreover, while the rate hikes are likely to continue, Fed officials agreed that the pace of the rate hikes should be slowed.
Nonetheless, market uncertainty remains, and investors should invest in fundamentally sound stocks that can provide consistent long-term returns.
We think McKesson Corporation (MCK), Molina Healthcare, Inc. (MOH), Progress Software Corporation (PRGS), and Universal Logistics Holdings, Inc. (ULH) are ideal buys in 2023, considering their sound fundamentals.
McKesson Corporation (MCK)
MCK is a diversified healthcare service provider focusing on advancing patients’ health outcomes globally. The company operates through four segments: U.S. Pharmaceutical; Prescription Technology Solutions (RxTS); Medical-Surgical Solutions; and International.
In terms of forward EV/Sales, MCK is currently trading at 0.21x, 94.7% lower than the industry average of 4.01x. The stock’s forward Price/Sales multiple of 0.20 is 95.7% lower than the industry average of 4.53.
MCK’s EBIT margin of 1.20% is higher than the negative 1.76% industry average. Its asset turnover ratio of 4.29% is compared with the 0.34% industry average.
MCK’s total revenues came in at $70.16 billion for the second quarter that ended September 30, 2022, increased by 5.4% year-over-year. Moreover, its income from continuing operations came in at $932 million, up 249.1% year-over-year. Also, its EPS came in at $6.46, up 277.8% year-over-year.
MCK’s revenue is expected to increase 4.6% year-over-year to $276.14 billion in 2023. Its EPS is expected to grow 4.6% year-over-year to $24.79 in 2023. Over the past year, the stock has gained 52.9% to close the last trading session at $381.96.
MCK’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MCK has an A grade for Growth and a B for Value, Stability, and Quality. In the Medical - Services industry, it is ranked first among the 78 stocks. Click here for the additional POWR Ratings for Sentiment and Momentum for MCK.
Molina Healthcare, Inc. (MOH)
MOH offers managed healthcare services under Medicaid and Medicare programs and through state insurance marketplaces. The company operates through four segments: Medicaid; Medicare; Marketplace; and Other.
In terms of forward EV/Sales, MOH is currently trading at 0.49x, 87.8% lower than the industry average of 4.01x. The stock’s forward Price/Sales multiple of 0.55 is 87.9% lower than the industry average of 4.53.
Its trailing-12-month EBITDA margin of 4.76% is 33.9% higher than the industry average of 3.55%. Furthermore, the stock’s 2.54% trailing-12-month asset turnover ratio is 654.8% higher than the industry average of 0.34%.
MOH’s total revenues came in at $7.93 billion for the third quarter that ended September 30, 2022, up 12.6% year-over-year. Its net income came in at $230 million, up 60.8% year-over-year. Also, its EPS came in at $3.95, up 60.6% year-over-year.
Analysts expect MOH’s revenue to increase 4.5% year-over-year to $33.07 million in 2023, while its EPS is expected to grow 9.9% year-over-year to $19.58. It surpassed EPS estimates in all four trailing quarters. Over the past six months, the stock has gained 3.9% to close the last trading session at $296.40.
It’s no surprise that MOH has an overall A rating which equates to a Strong Buy in our POWR Ratings system.
It has a B for Growth, Value, and Quality. It is ranked #5 out of 11 stocks in the A-rated Medical - Health Insurance industry. Beyond what is stated above, we’ve also rated MOH for Stability and Quality. Get all MOH ratings here.
Progress Software Corporation (PRGS)
PRGS develops, deploys, and manages business applications. The company offers OpenEdge, Sitefinity, and Corticon.
On January 3, 2023, PRGS announced it had entered into a definitive agreement to acquire MarkLogic, a leader in managing complex data and metadata, and a Vector Capital portfolio company.
MarkLogic is expected to enhance PRGS’ commitment to delivering the best products to develop, deploy and manage high-impact applications by providing a unified enterprise-grade semantic data platform that empowers customers to derive value from complex data.
In terms of forward EV/EBIT, PRGS is currently trading at 10.92x, 32.8% lower than the industry average of 16.25x.
PRGS’s EBIT margin of 20.93% is 216.02% higher than the 6.62% industry average. Its EBITDA margin of 33.08% is 183.4% higher than the 11.67% industry average.
For the fiscal third quarter ended August 31, 2022, PRGS’s revenue came in at $151.22 million, up 2.6% year-over-year. The company’s maintenance and services revenue increased 8.5% year-over-year to $103.60 million, while its gross profit increased marginally from the year-ago value to $127.42 million.
Street expects its revenue to increase by 2.6% year-over-year to $630.30 million in 2023. Its EPS is expected to grow 6.3% year-over-year to $4.36 in 2023. It surpassed EPS estimates in all four trailing quarters. Over the past three months, the stock has gained 15.5% to close the last trading session at $51.85.
PRGS has an overall A rating, which equates to a Strong Buy in our POWR Ratings system. It has an A grade for Quality and a B for Value. PRGS is ranked #2 out of 139 stocks in the Software – Application industry. To see the additional POWR Ratings for PRGS (Stability, Growth, Momentum, and Sentiment), click here.
Universal Logistics Holdings, Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. The business engages in the trucking; intermodal; logistics; and brokerage segments.
In terms of forward Price/Book, ULH is currently trading at 2.06x, 19.5% lower than the industry average of 2.56x. The stock’s forward Price/Sales multiple of 0.45 is 64.7% lower than the industry average of 1.28.
ULH’s EBIT margin of 11.15% is 14.6% higher than the 9.73% industry average. Its EBITDA margin of 14.33% is 8% higher than the 13.27% industry average.
ULH’s operating revenues increased 13.5% year-over-year to $505.69 million for the third quarter that ended October 1, 2022. Its operating profit came in at $48.48 million, up 371.9% year-over-year. Moreover, Its EPS came in at $1.84, up 384.2% year-over-year.
ULH’s EPS is estimated to grow 3% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 86.4% to close the last trading session at $34.81.
ULH has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Growth and Sentiment and a B for Value, Momentum, and Stability. ULH is ranked first among 16 stocks in the A-rated Air Freight & Shipping Services industry. Get additional POWR Ratings for ULH (Quality) here.
MCK shares were trading at $382.03 per share on Tuesday afternoon, up $0.07 (+0.02%). Year-to-date, MCK has gained 1.84%, versus a 1.92% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
4 Stocks You Should Be Eager to Buy in 2023 StockNews.com
