Consumer cyclical stocks have seen significant price declines amid a slowdown in consumer sentiment and a contraction in macroeconomic growth rates. However, consumer spending remains strong and this could help ODP (ODP), Movado Group (MOV), and TravelCenters of America (TA) perform well despite the economic turmoil. Therefore, we think that investors should take advantage of the decline and scoop up the shares of these companies. Read on
With higher inflation, the Fed’s interest rates rising, and under pressure from the recession, the University of Michigan’s consumer sentiment index fell 9.4% from April, hitting a rock bottom with a 59.1 reading in May. Moreover, following the contraction of marginal GDP growth of the US economy in the last quarter, the performance of consumer cyclical stocks, which are highly dependent on the trading cycle, has been negatively affected. However, certain economically strong consumer cyclical stocks may be worth betting on.
In addition, US consumer spending rose more than expected in April, despite fears of a wider recession and declining growth. Also, the current job market is hot, which could generate substantial consumer spending in the coming months, boosting the consumer cycle industry.
With this background in mind, we think that fundamentally good consumer cyclical companies like ODP Corporation (ODP), Movado Group, Inc. (MOV), and TravelCenters of America Inc. It may be wise to reduce the price of (TA) stock. These stocks appear to be undervalued at their current prices.
ODP Corporation (ODP)
Boca Raton, Fla.-based ODP provides business services and supplies, products, and digital workplace technology solutions for small, medium and enterprise businesses. The company operates in two divisions – business solutions, and retail.
On May 4, 2022, ODP CEO Gary Smith said, “We are moving forward with our new digital platform business, Veris, receiving positive feedback from key construction partners as we approach the platform’s wide launch later this year. We are excited about the progress being made in our supply chain and purchasing service provider, Veyer, and in support of our B2B and B2C businesses, and we are also excited about the future value of offering logistics services to other third parties. The future. “
ODP sales were 2.18 billion in the first quarter ending March 26, 2022, up from $ 2.17 billion in the year-ago period. Its net income came in at $ 55 million, up 3.8% year-over-year, while its EPS was $ 1.09, up 14.7% year-over-year.
0.27x ahead of ODP EV / S 1.11x is 75.8% lower than the industry average. Its 0.22x forward P / S 0.91x is 75.7% lower than the industry average.
Analysts expect ODP’s EPS to grow 12.3% per year over the next five years. Additionally, it has surpassed consensus EPS estimates in three of the last four quarters. Last month, the stock fell 13.3% in value to close at सत्र 37.29 yesterday session.
The strong fundamentals of ODP are reflected in its POWR ratings. The stock has an overall A rating, which indicates a strong buy in our proprietary valuation system. The POWR rating evaluates stocks by 118 different factors, each with its own weight.
ODP has A grade for price and quality and B grade for growth. Within the specialty retailer industry, it ranks first among 44 stocks. Click here to see additional POWR ratings for ODP for speed, stability, and emotion.
Click here to check out our retail industry report for 2022
Movado Group, Inc. (MOV)
Paramus distributes MOV, NJ designs, resources, markets, and watches worldwide. The company operates in two segments: watch and accessory brands and company stores. It sells directly to consumers through its e-commerce platforms and operates more than 50 retail outlet locations.
On May 26, 2022, Efraim Grinberg, President, and CEO, stated, “The diversity of our business models continues to serve us well and we have successfully capitalized on growth opportunities in our portfolio, channels and geographic areas, especially in Europe. , India and Latin America.
Net sales of MOV rose 21.2% year-over-year to $ 163.42 million for the first quarter ended April 30, 2022. Its adjusted non-GAAP net income came in at 19.13 million, up 89.6% year-over-year. And its adjusted non-GAAP EPS came in at 8 0.82, up 90.7% year-over-year.
0.87x ahead of MOV EV / S 1.11x is 21.9% lower than the industry average.
For its fiscal year 2023, analysts expect MOV revenue to be $ 796.20 million, representing 8.7% year-over-year growth. The company’s EPS is expected to grow by 15 percent annually over the next five years. It has surpassed the consensus EPS estimate in each of the last four quarters. And last month, the stock price fell 7.8% to close at सत्र 33.16 yesterday.
MOV’s POWR ratings reflect this promising outlook. The stock has an overall B rating, which is equivalent to a buy in our POWR rating system. It has A grade for price and quality.
Click here to see MOV’s ratings for growth, speed, stability, and emotion. Again, MOV ranks # 8 out of 68 stocks in the B-rated fashion and luxury industry.
Travel Center of America Inc.PER)
TA operates travel centers, truck service facilities, and restaurants in the United States and Canada. In Westlake, Ohio, the company operates the Travel Center of America, TA, TA Express, Petro Stopping Centers, and 276 Travel Centers under the Petro brand names in 44 states in the United States and Ontario, Canada.
Last month, TA launched a new TA Express Travel Center in Fairfield, Tex. Opened in, Interstate 45, located at Exit 198, which expands TA’s network of total nationwide travel centers to 276 sites, including 45 franchise sites.
On May 2, 2022, TA CEO Jonathan M. “We got two places in April and continue to evaluate additional opportunities,” Parchik said. We’ve also completed half of the nearly 100 planned site refreshes, the balance expected to be completed by the end of 2022, which will provide our existing customers with an upgraded experience and potentially attract new customers and guests to TA.
TA’s total revenue grew 50.2% year-over-year to $ 2.30 billion in the first quarter ended March 31, 2022. Its net income came in at 16.30 million, compared to a deficit of $ 5.82 million in the year-ago period. Moreover, its EPS came in at 10 1.10, compared to a loss of 40 0.40 per share in the previous period.
0.23x ahead of the stock EV / Sis 1.10x is 79.2% lower than the industry average. Its 0.06x forward P / S 0.89x is 93.8% lower than the industry average.
For its fiscal 2022, TA’s revenue is expected to grow 40% annually to $ 10.27 billion. Its EPS is projected to increase by 11.4% over the previous year to reach 5 4.58 in 2022. In addition, it surpassed the consensus EPS estimate for each of the last four quarters. And the stock fell marginally to close at सत्र 38.08 yesterday session.
TA’s strong fundamentals are reflected in its POWR evaluation. The stock has an overall B rating, which is equivalent to a purchase in our proprietary valuation system.
Additionally, it has an A grade for price and a B grade for emotion and quality. Click here to see more POWR ratings for TA (growth, speed, and stability). TA is ranked # 3 out of 44 stocks in the specialized retailer industry.
ODP shares remained unchanged in pre-market trading on Thursday. Year-to-date, ODP has declined -5.07%, against -13.50% increase in the benchmark S&P 500 index over the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a bachelor’s degree in economics, she helps investors make informed investment decisions through her insightful comments.
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