Last year was challenging for the stock market, with high inflation worries and the Federal Reserve tightening interest rates aggressively. However, these efforts now appear to be bearing fruit, with the economy spurning to cool down, as evidenced by less-than-expected wage growth in the latest employment data.
However, although inflation seems to be cooling off, it remains historically elevated, which is predicted to hike rates further. Market experts say there is a 7-in-10 probability that the U.S. economy will slip into a recession in 2023, slashing demand forecasts and trimming inflation projections in light of tremendous interest rate increases.
Against this economic backdrop, most stocks have suffered significant price declines due to the broad market sell-off and are currently trading at attractive valuations. Hence, this might be the right opportunity for bargain hunters to load up fundamentally strong stocks at low prices.
Thus, it could be wise for investors to buy cheap quality stocks Stellantis N.V. (STLA), AudioCodes Ltd. (AUDC), and Ooma, Inc. (OOMA), trading under $20, which look well-positioned to generate impressive returns.
Stellantis N.V. (STLA)
Headquartered in Hoofddorp, Netherlands, STLA designs, engineers, manufactures, distributes, and sells vehicles, components, and production systems. The company’s brand portfolio includes Abarth, Alfa Romeo, Chrysler, Dodge, Fiat, Fiat Professional, Jeep, Lancia, Ram, Peugeot, Citroen, DS Automobiles, Opel and Vauxhall, and Maserati.
On January 9, 2023, STLA signed a binding agreement with Element 25 Limited to supply high-purity manganese sulfate monohydrate used for electric vehicle batteries. The five-year agreement calls for shipments to begin in 2026, with provisions to extend the term and increase volumes.
With this agreement, STLA strengthens its value chain for EV battery production, thereby supporting its Dare Forward 2030 strategic plan targets.
On December 23, 2022, the company announced its plans to acquire a stake in Symbio, a Faurecia Michelin hydrogen company and fuel cell technologies provider for the mobility industry.
Also, on December 22, STLA acquired aiMotive, a developer of advanced artificial intelligence and autonomous driving software. Such lucrative acquisitions are expected to bolster the company’s future productivity.
STLA’s net revenues rose 21.2% year-over-year to €88 billion ($94.45 billion) for the half-year that ended June 30, 2022. The company’s adjusted operating income increased 46.6% year-over-year to €12.37 billion ($13.28 billion), while its net profit increased 37.2% year-over-year to €7.96 billion ($8.54 billion).
Additionally, its net revenue for the third quarter ended September 30, 2022, came in at €42.10 billion ($45.19 billion), up 29.1% from the prior-year quarter, reflecting higher volumes, continued strong net pricing and favorable FX translation effects.
In terms of forward non-GAAP P/E, STLA is trading at 2.80x, 79.9% lower than the industry average of 13.91x. The stock’s forward EV/Sales multiple of 0.16 is 86.1% below the industry average of 1.16. Also, its forward EV/EBIT multiple of 1.26 compares to the industry average of 13.23.
Street expects STLA’s revenue and EPS to increase 10.4% and 0.5% year-over-year to $189.86 billion and $5.66, respectively, for the fiscal year ended December 2022. The stock has gained 33.8% over the past three months to close the last trading session at $15.87.
STLA’s POWR Ratings reflect this promising outlook. The stock 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 also has an A grade for Value and a B for Stability and Sentiment. It is ranked #7 of 63 stocks in the Auto & Vehicle Manufacturers industry. To see the other ratings of STLA for Growth, Momentum, and Quality, click here.
AudioCodes Ltd. (AUDC)
Headquartered in Lod, Israel, AUDC is a leading vendor of advanced voice networking and media processing solutions for the digital workplace. It offers solutions, products, and services for unified communications, contact centers, VoiceAI business lines, and service provider businesses.
AUDC’s trailing-12-month EBIT margin and net income margin of 11.92% and 10.41% are 80% and 223.2% higher than the industry averages of 6.62% and 3.22%, respectively. Its trailing-12-month ROCE of 14.74% is 195.4% higher than the 4.99% industry average.
AUDC’s total revenues increased 11.8% year-over-year to $204.44 million for the third quarter that ended September 30, 2022. Its gross profit grew 4.9% year-over-year to $132.62 million. The company’s non-GAAP net income and non-GAAP EPS came in at $33.03 million and $0.99, respectively, for the same period.
In terms of forward non-GAAP P/E, AUDC is trading at 13.49x, 29.7% lower than the industry average of 19.19x. The stock’s forward EV/Sales multiple of 1.69 is 35.2% below the industry average of 2.62. Also, its forward Price/Sales multiple of 2.10 compares to the industry average of 2.63.
Analysts expect AUDC’s revenue and EPS for the first quarter of fiscal 2023 (ending March 2023) to increase 10.2% and 9% year-over-year to $73.15 million and $0.36, respectively. Over the past month, the stock has gained marginally to close the last trading session at $18.30.
AUDC’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Value and Stability. It is ranked #2 of 48 stocks in the B-rated Technology - Communication/Networking industry. Click here to see the other ratings of AUDC for Growth, Momentum, and Sentiment.
Ooma, Inc. (OOMA)
OOMA provides communications services and related technologies to businesses and residential customers in the United States and Canada. Its products include Ooma Business, Ooma Office, Ooma Enterprise, and Ooma AirDial.
On November 29, 2022, the company announced that T-Mobile for Business had started offering Ooma AirDial, a solution for POTS replacement, as part of its Internet of Things portfolio. This reflects the growing demand for OOMA's services and its vast market reach.
In September, OOMA announced that it had acquired Junction Networks Inc., a cloud-based phone and unified communications services provider. The acquisition is expected to increase the company’s profitability and cash flows.
OOMA’s total revenue increased 15.3% year-over-year to $56.78 million for the third quarter that ended October 31, 2022. Its gross profit grew 18.8% from the year-ago value to $35.92 million, while its non-GAAP operating income rose 7.8% year-over-year to $3.51 million.
The company’s non-GAAP net income and non-GAAP net income per share increased 4.7% and 7.7% year-over-year to $3.46 million and $0.14, respectively. In addition, its adjusted EBITDA came in at $4.50 million, up 11.7% from the previous year’s quarter.
In terms of forward EV/Sales, OOMA is trading at 1.48x, 20.8% lower than the industry average of 1.87x.
Analysts expect OOMA’s revenue to increase 11.7% year-over-year to $56.40 million in the fourth quarter (ending January 2023). Its EPS is estimated to grow 10.3% year-over-year to $0.14 in the current quarter. Moreover, it surpassed EPS estimates in each of the trailing four quarters, which is promising.
Over the past six months, the stock has gained 12.3% to close the last trading session at $13.33.
It is no surprise that OOMA has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has an A grade for Growth and a B for Value, Stability, and Sentiment. Within the Telecom – Domestic industry, it is ranked #2 out of 19 stocks.
In addition to the POWR Ratings stated above, we have also given OOMA grades for Momentum and Quality. Get all OOMA ratings here.
STLA shares were trading at $15.78 per share on Wednesday afternoon, down $0.09 (-0.57%). Year-to-date, STLA has gained 11.13%, versus a 3.08% 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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