The Consumer Price Index fell 0.1% in December 2022, in line with the Dow Jones estimate, providing some optimism that price pressures are finally easing from their highest level in decades. This could allow the Federal Reserve to dial back on its interest rate hikes.
On top of it, the University of Michigan Surveys of Consumers said that the one-year inflation outlook slipped to a preliminary reading of 4.0% in January from 4.4% in December. Also, the closely watched consumer sentiment index rose to 64.6 in this month’s preliminary survey, the highest reading since January 2022. It is up 8.2% from December’s 59.7 reading, reflecting a perked-up consumer spirit.
Furthermore, as per the Goldman Sachs 2023 outlook, even with a sour economy, the 2023 investment return on the S&P 500 will likely be between 9-12% this year. That’s a significant jump from the last year’s nearly 20% loss.
Given the backdrop, we think investors could consider investing in fundamentally strong penny stocks Ambev S.A. (ABEV), GEE Group Inc. (JOB), and Data Storage Corporation (DTST), which look undervalued at their current prices. These stocks might potentially soar in the near term.
Ambev S.A. (ABEV)
ABEV produces, distributes, and sells beer, draft beer, carbonated soft drinks, other non-alcoholic beverages, malt, and food products. The company operates through four segments: Brazil; Central America and the Caribbean; Latin America South; and Canada. The company is headquartered in São Paulo, Brazil.
ABEV pays an annual dividend of $0.14 that yields 5.32% on prevailing prices, which is higher than its four-year average dividend yield of 3.47%.
It’s forward EV/EBIT multiple of 11.42x is 28.6% lower than the industry average of 16.00x, while the stock’s forward non-GAAP P/E multiple of 17.22x is 11% lower than the industry average of 19.36x.
For the fiscal 2022 third quarter ended September 30, 2022, ABEV’s net revenue increased 11.3% year-over-year to R$20.59 billion ($4.04 billion), while its gross profit grew 7.6% year-over-year to R$9.93 billion ($1.95 billion). The company’s normalized EBITDA increased 2.4% year-over-year to R$5.60 billion ($1.10 billion).
Analysts expect ABEV’s revenue to rise 9.32% year-over-year to $4.70 billion in the fiscal fourth quarter that ended December 2022. The company has surpassed the consensus EPS estimates in all trailing four quarters and the consensus revenue estimates in three out of the trailing four quarters, which is impressive.
ABEV’s shares have gained 1.9% over the past six months to close its last trading session at $2.71. It has a 24-month beta of 0.17.
ABEV’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
ABEV has a B grade for Sentiment and Quality. The stock is ranked #12 among the 36 stocks in the A-rated Beverages industry.
Click here to access ABEV’s additional grades for Momentum, Stability, Value, and Growth.
GEE Group Inc. (JOB)
JOB provides permanent and temporary professional and industrial staffing and placement services in the United States. The company operates through two business segments: Industrial Staffing Services and Professional Staffing Services.
Its forward Price/Book multiple of 0.52x is 80.2% lower than the industry average of 2.63x. In terms of forward EV/Sales, the stock is trading at 0.28x, which is 84.3% lower than the industry average of 1.79x.
JOB’s net revenue increased marginally year-over-year to $41.52 million for the fourth quarter ended September 30, 2022. For the fiscal year ended September 30, 2022, the company’s free cash flow amounted to $8.90 million, compared to $244,000 in the same period the previous year, and its non-GAAP adjusted EBITDA rose 1.5% from the prior-year quarter to $12.46 million.
JOB’s revenue is expected to increase marginally year-over-year to $165.82 million in the fiscal year 2023 ending September 2023.
The stock gained 1.3% intraday to close the last trading session at $0.54. JOB has a 24-month beta of 0.61.
Its strong fundamentals are reflected in its POWR Ratings. JOB 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 Quality. It is ranked #8 out of 21 stocks in the A-rated Outsourcing – Staffing Services industry.
Beyond what is stated above, we have also given JOB grades for Growth, Momentum, Sentiment, and Stability. Get all the JOB ratings here.
Data Storage Corporation (DTST)
DTST provides multi-cloud information technology solutions in the U.S. The company offers data protection and disaster recovery solutions, high availability, data vaulting, DRaaS, IaaS, message logic, standby server, support, maintenance, and internet solutions.
In terms of forward EV/Sales, the stock is trading at 0.07x, which is 97.5% lower than the industry average of 2.74x, while its forward Price/Sales of 0.47x is 82.8% lower than the industry average of 2.74x.
DTST’s sales rose 14.5% year-over-year to $4.42 million for the third quarter ended September 30, 2022. Its gross profit came in at $1.85 million, up 20.1% year-over-year. The company’s adjusted EBITDA increased 54.7% from the prior-year quarter to $162.39 thousand.
Street expects DTST’s revenue to increase 56.6% year-over-year to $23.30 million for the to-be-reported fiscal year ended December 2022. It has surpassed the consensus EPS estimates in three of the four trailing quarters.
The stock gained 1.3% intraday to close the last trading session at $1.61. It has a 60-month beta of 0.41.
It is no surprise that DTST has an overall B rating, which equates to a Buy in our POWR Ratings system.
It has an A grade for Sentiment and a B grade for Value and Quality. It is ranked #6 in the 66-stock Internet industry.
To see the additional POWR Ratings for Momentum, Growth, and Stability for DTST, click here.
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ABEV shares were unchanged in premarket trading Monday. Year-to-date, ABEV has declined -0.37%, versus a 4.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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