Last week, the Federal Reserve raised interest rates by a quarter of a percentage point, bringing the rates between 0.25% and 0.5%. With more rate increases expected in 2022, investor sentiment remains mixed. However, the stock market delivered its best weekly performance since November 2020. Because concerns related to the interest rate increases have already been factored into stock prices, value stocks are expected to rebound to their fair values soon.
Investors generally favor value stocks over growth stocks in an inflationary environment. According to AQR’s co-founder Cliff Asness, value stocks are more than just an interest-rate bet. So, given the current inflationary environment, it could be wise to bet on stocks that are trading at discounts but possess fundamental strength. Investors’ interest in this space is evidenced by the Vanguard Value Index Fund ETF Shares’ (VTV) 2.3% returns over the past three months versus the SPDR S&P 500 ETF Trust’s (SPY) 3.3% decline.
Therefore, we think quality stocks Moderna, Inc. (MRNA), Bayer Aktiengesellschaft (BAYRY), Henkel AG & Co. KGaA (HENKY), AGCO Corporation (AGCO), and Penske Automotive Group, Inc. (PAG), which are currently trading at discounts to their peers, could be solid bets now.
Moderna, Inc. (MRNA)
MRNA in Cambridge. Ma., is a biotechnology company that develops therapeutics and vaccines based on messenger RNA to treat infectious diseases, immuno-oncology, rare diseases, cardiovascular diseases, and auto-immune diseases in the United States and internationally.
On Feb. 24, 2022, Stéphane Bancel, MRNA’s CEO, said, “We continue to expand and advance our industry-leading mRNA pipeline with 44 programs in development. We look forward to clinical readouts from our therapeutics development candidates later in 2022 in rare genetic diseases and oncology. We are entering 2022 with a remarkable team and strategic priorities to continue advancing mRNA vaccines and therapeutics to impact human health.”
For the fourth quarter, ended Dec. 31, 2021, MRNA’s total revenue came in at $7.21 billion, up 1,162.9% year-over-year. Its net income was $4.87 billion, compared to a $272 million loss in the year-ago period. Also, its EPS was $11.29 compared to a $0.69 per share loss in the prior-year period.
In terms of forward EV/S, MRNA’s 2.50x is 45.5% lower than the 4.60x industry average. Its 3.26x forward P/S is 40.9% lower than 5.51x the industry average.
MRNA’s revenue is expected to be $21.88 billion in its fiscal year 2022, indicating an 18.4% increase. Its EPS is also expected to increase 16.8% per annum for the next five years. The stock surpassed its EPS estimates in three of the trailing four quarters. And over the past month, it has gained 22.8% to close yesterday’s trading session at $178.93.
MRNA’s POWR Ratings reflect its promising outlook. It has an overall B rating representing a Buy in our POWR Rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
MRNA has an A grade for Value and Quality and a B grade for Growth. It is ranked #25 of 426 stocks in the Biotech industry. Click here to see the additional POWR Ratings for MRNA (Momentum, Stability, and Sentiment).
Click here to checkout our Healthcare Sector Report for 2022
Bayer Aktiengesellschaft (BAYRY)
Headquartered in Leverkusen, Germany, BAYRY and its subsidiaries operate worldwide as a life science company. It works through Pharmaceuticals; Consumer Health; and Crop Science segments.
On Dec. 9, 2021, BAYRY, Bushel, and Amazon Web Services unveiled their Project Carbonview. Leo Bastos, Global Commercial Ecosystems Lead, BAYRY Crop Science, said, “While FieldView helps farmers make more informed decisions on their operations, Project Carbonview will allow them to drive sustainability improvements across the entire value chain.”
BAYRY’s distributable profits for its fiscal year ended Dec. 31, 2021, came in at €2.06 billion ($2.27 billion), up 4.6% year-over-year. Its investments came in at €72.04 billion ($79.53 billion) for the period ended Dec. 31, 2021, compared to €66.37 billion ($73.27 billion) for the period end Dec. 31, 2020. The company’s total assets were €84.09 billion ($92.84 billion), compared to €83.29 billion ($91.95 billion), also for the same period.
BAYRY’s 1.94x forward EV/Sis 57.7% lower than the 4.60x industry average. Its 1.23 forward P/S is 77.7% lower than the 5.51x industry average.
BAYRY’s revenue is expected to grow 3.4% year-over-year to $53.08 billion in its fiscal year 2023. Its EPS is estimated to grow 5.2% year-over-year to $2.03 in its fiscal 2023. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 23.7% in price to close Friday’s trading session at $16.10.
BAYRY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Value and a B grade for Stability.
BAYRY is ranked #19 of 174 stocks in the Medical - Pharmaceuticals industry. Click here to see BAYRY’s growth, Momentum, Sentiment, and quality ratings.
Click here to checkout our Healthcare Sector Report for 2022
Henkel AG & Co. KGaA (HENKY)
Headquartered in Düsseldorf, Germany, HENKY and its subsidiaries are in the adhesive technologies, beauty care, and laundry and home care businesses worldwide. Its segments are Adhesive Technologies and Laundry & Home Care.
On Feb. 3, 2022, HENKY’s CEO, Carsten Knobel, said, “Overall, we delivered a good business performance in 2021 and consistently drove the implementation of our strategic agenda forward–despite a very challenging market environment with unprecedented disruptions in global supply chains, a shortage of key raw materials as well as overall significantly increasing prices.”
HENKY’s organic sales came in at €20.10 billion ($22.20 billion) for the year ended Dec. 31, 2021, up 7.8% year-over-year. Its adjusted operating profit increased 4.2% year-over-year to €2.7 billion ($2.98 billion). And its adjusted EPS increased 7% year-over-year to €4.56.
HENKY’s 1.34x forward EV/S is 31.4% lower than the 1.95x industry average. Also, its 8.16x forward EV/EBITDA is 31.8% lower than the 11.96x industry average. The stock closed Friday’s session at $16.96.
Under the POWR Ratings, HENKY has an A grade for Value and a B grade for Stability. It is ranked #13 of 63 stocks in the Consumer Goods industry. Click here to see the additional POWR Ratings for HENKY (Growth, Momentum, Sentiment, and Quality).
AGCO Corporation (AGCO)
AGCO is a Duluth, Ga.-based global leader in the design, manufacture, and distribution of agricultural solutions, and delivers high-tech solutions for farmers feeding the world through its full line of equipment and related services.
On Feb. 8, 2022, Eric Hansotia, AGCO’s Chairman, President, and CEO, said, “Our teams are working tirelessly with our suppliers to mitigate the impact of these issues to serve our customers and deliver another strong year of performance. We are forecasting sales growth and margin expansion in 2022 as industry demand trends positively, and our farmer-first strategy gains traction.”
AGCO’s net sales increased 16.1% year-over-year to $3.16 billion for the fourth quarter, ended Dec.31, 2021. Its net income came in at $282.10 million, up 108.3% year-over-year, while its EPS came in at $3.75, up 110.7% year-over-year.
AGCO’s 0.87x forward EV/S is 51.5% lower than the 1.79x industry average. Its 0.80x forward P/S is 43.8% lower than the 1.43x industry average.
Analysts expect AGCO’s revenue to be $12.31 billion in its fiscal year 2022, representing a 10.6% year-over-year rise. The company’s EPS is expected to increase 13.8% per annum for the next five years. It surpassed the EPS estimates in each of the trailing four quarters. And over the past three months, the stock has gained 17.9% in price to close Friday’s session at $132.46.
AGCO has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Sentiment.
Within the Agriculture industry, it is ranked #5 of 29 stocks. Also, click here to see the additional POWR Ratings for Growth, Momentum, Stability, and Quality for AGCO.
Penske Automotive Group, Inc. (PAG)
PAG in Bloomfield Hills, Mich., is a diversified transportation services company that operates automotive and commercial truck dealerships. The company operates through four segments: Retail Automotive; Retail Commercial Truck; Other; and Non-Automotive Investments.
On Feb. 9, 2022, PAG’s Chair and CEO Roger Penske said, “Over the last two years, we have paid down nearly $900 million in non-vehicle debt, reduced our debt to total capitalization to 26% from 46%, and improved our leverage ratio from 2.9x to 0.8x and as of December 31, 2021, returned over $530 million to shareholders through share repurchases and cash dividends.”
For the fourth quarter, ended Dec.31, 2021, PAG’s revenue came in at $6.30 billion, up 8.3% year-over-year. Its net income came in at $311.30 million, up 55.5% year-over-year. In addition, its EPS increased 60.2% year-over-year to $3.99.
PAG’s 0.53x forward EV/S is 57.6% lower than the 1.25x industry average, while its 0.30x forward P/S is 70% lower than the 0.99x industry average.
PAG’s revenue is expected to increase 6.5% to $27.21 billion in 2022. Its EPS is estimated to increase 20.7% per annum for the next five years. It surpassed EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 26.9% to close Friday’s session at $104.61.
PAG has an overall B rating, which equates to a Buy in our POWR Ratings system. It has an A grade for Value and a B grade for Growth. It is ranked #2 of 25 stocks in the Auto Dealers & Rentals industry. Click here to check additional ratings for PAG (Momentum, Stability, Sentiment, and Quality).
What To Do Next?
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MRNA shares were trading at $174.12 per share on Monday morning, down $4.81 (-2.69%). Year-to-date, MRNA has declined -31.44%, versus a -6.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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