The economy is on the cusp of a recession as the economy contracted 0.9% in the second quarter after a 1.6% decline in the first quarter. In addition, the Federal Reserve recently raised the benchmark interest rates by 75 basis points to bring down record-high inflation, exacerbating recession risks.
Furthermore, according to purchasing managers’ surveys, U.S. business activity declined sharply in July. The composite U.S. purchasing managers index stood at 47.5 in July, with a reading below 50 indicating a contraction.
Despite the recent market rally owing to better-than-expected corporate earnings and the Fed’s indication that it might consider pausing its monetary policy, the S&P 500 and Nasdaq Composite remained 13.3% and 20.8% down year-to-date, respectively.
However, the market downturn has created attractive buying opportunities for investors as many fundamentally sound stocks are currently trading at rock-bottom prices.
Quality stocks ARC Document Solutions, Inc. (ARC), Compañía Cervecerías Unidas S.A. (CCU), Hill International, Inc. (HIL), and TravelCenters of America Inc. (TA), which are currently trading way below their 52-week highs, could be solid investments now. These stocks are rated Strong Buy in our proprietary POWR Ratings system.
ARC Document Solutions, Inc. (ARC)
ARC is a leading digital printing company that offers digital printing and document-related services. The company provides managed print services, cloud-based document management software, ancillary services, and other digital hosting services. It operates more than 146 service centers in the United States, Canada, China, the United Kingdom, India, United Arab Emirates.
In July, ARC announced that its Board of Directors declared a quarterly cash dividend of $0.05 per share, payable on November 30, 2022. The company approved an increase in its quarterly cash dividend from $0.02 to $0.05 per share in December 2021, registering a 150% increase. The increase in quarterly cash dividend reflects its commitment to returning shareholder value.
In the fiscal 2022 first quarter ended March 31, 2022, ARC’s net sales increased 12.6% year-over-year to $69.50 million, while its gross profit grew 19.5% from the year-ago value to $22.45 million. Its income from operations improved 78.2% year-over-year to $3.06 million. The company’s adjusted EBITDA amounted to $9.10 million, up 3.4% year-over-year.
In addition, adjusted net income attributable to ARC and adjusted earnings per share came in at $2 million and $0.05, registering increases of 122.2% and 150% from the prior-year period, respectively.
The consensus revenue estimate of $286.90 million for the fiscal year 2022 (ending December 2022) represents a 5.4% year-over-year growth. The consensus EPS estimate of $0.26 for the ongoing year represents a rise of 18.2% from the previous year. Also, Street expects its EPS to grow 10% per annum over the next five years.
The stock has gained 4.5% over the past month and 35.1% over the past year to close the last trading session at $2.81. ARC is currently trading 32.8% below its 52-week high of $4.18, which it hit on March 30, 2022.
ARC’s POWR Ratings reflect a strong outlook. The stock has an overall rating of A, which translates to Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ARC has a grade of A for Value and Quality. It has a grade of B for Growth and Sentiment. It is ranked #2 of 42 stocks in the B-rated Outsourcing – Business Services industry. Click here to see ARC’s POWR Ratings for Stability and Momentum.
Compañía Cervecerías Unidas S.A. (CCU)
Headquartered in Santiago, Chile, CCU operates as a beverage company in Chile, Argentina, Bolivia, Colombia, Paraguay, and Uruguay. The company operates through three segments: Chile; International Business; and Wine. It produces and sells alcoholic and non-alcoholic beverages under proprietary and licensed brands. It serves small and medium-sized retail outlets and retail establishments.
CCU’s revenue increased 23% year-over-year to CLP700.47 billion ($776.18 million) in the fiscal 2022 first quarter ended March 31, 2022. Its gross margin rose 11.9% from the year-ago value to CLP323.73 billion ($358.72 million).
The company’s EBIT grew 6.2% year-over-year to CLP105.90 billion ($117.35 million), and its EBITDA stood at CLP135.13 billion ($149.74 million), up 6.8% year-over-year.
Furthermore, the company’s net income and earnings per share came in at CLP64.54 billion ($71.52 million) and CLP174.70, registering a marginal rise from the prior-year period.
The $3.06 billion consensus revenue estimate for the fiscal year 2023, ending December 2022, represents a 7.4% improvement from the last year. Analysts expect CCU’s EPS for the next year to increase 22.6% year-over-year to $1.03. The company has topped the consensus revenue estimates in three of the trailing four quarters.
The stock has gained 3.6% over the past five days to close the last trading session at $11.54. It is currently trading 47.1% below its 52-week high of $21.82, which it hit on August 5, 2021.
CCU’s POWR Ratings reflect a promising outlook. The stock has an overall grade of A, which equates to a Strong Buy in our proprietary rating system.
CCU has a grade of A for Value and B for Stability and Quality. Within the A-rated Beverages industry, it is ranked #6 of 35 stocks. To see additional POWR Ratings (Momentum, Growth, and Sentiment) for CCU, click here.
Hill International, Inc. (HIL)
HIL provides project and construction management, labor compliance and facilities management, and other consulting services primarily for buildings, transportation, environment, energy, and industrial markets. The company serves the United States federal, state, and local governments and the private sector. It operates in the Americas, Europe, Africa, and the Asia Pacific.
On May 26, HIL was awarded a contract from the Albanian Ministry of Infrastructure and Energy to provide Project Management services for constructing the Llogara Tunnel. The project will improve the country’s connectivity and road safety and help grow its tourism sector. The new contract is expected to boost the company’s growth and revenues.
On May 12, HIL was selected by the Town of Swampscott, MA, to provide owner’s project management (OPM) services for the Hadley Elementary School project.
“As America reinvests in its public facilities and infrastructure, Hill is ready to continue our decades-long relationship with municipalities like Swampscott in making certain they realize their projects as efficiently and cost-effectively as possible,” said Hill’s CEO Raouf Ghali.
In the fiscal 2022 first quarter ended March 31, 2022, HIL’s total revenue grew 17.4% year-over-year to $102.24 million, and its gross profit improved 16.9% from the year-ago value to $31.84 million. The company’s operating profit rose 758.4% year-over-year to $1.01 million. Its cash inflows from financing activities came in at $5.32 million, up 57.2% year-over-year.
HIL’s shares have gained 4.2% over the past month to close the last trading session at $1.74. HIL is currently trading 31.5% below its 52-week high of $2.54, which it hit on August 31, 2021.
HIL’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, equating to a Strong Buy in our proprietary rating system.
HIL has a grade of B for Growth and Quality. Within the B-rated Industrial-Services industry, it is ranked #4 of 89 stocks. Click here to see HIL’s additional POWR Ratings (Value, Momentum, Stability, and Sentiment).
TravelCenters of America Inc. (TA)
TA operates travel centers, truck service facilities, and restaurants in the United States and Canada. The company’s travel centers offer products and services, including diesel fuel and gasoline, and non fuel products and services, such as truck repair and maintenance services, diesel exhaust fluids, quick-service restaurants, and various customer amenities.
The company operates 276 travel centers in 44 states in the United States and the province of Ontario, Canada, three truck service facilities operated under the TA Truck Service brand name, and one restaurant.
In May, TA opened a new TA Express travel center in Fairfield, Texas. The newly constructed TA Express is a franchised location and expands the company’s nationwide network of travel centers to 276 sites, including 45 franchised sites. The network growth and enhancing the guest experience are vital components of TA’s transformation.
In the fiscal 2022 first quarter ended March 31, 2022, TA’s revenues increased 50.2% year-over-year to $2.30 billion. Its income from operations grew 417.9% year-over-year to $32.05 million. Its adjusted EBITDA amounted to $55.38 million, up 93.5% year-over-year.
The company’s adjusted net income and net income per share of common stock attributable to common stockholders came in at $15.16 million and $1.03, up 388.4% and 400% from the prior-year period, respectively.
Analysts expect TA’s revenue for the fiscal year 2022 (ending December 2022) to come in at $10.27 billion, representing a 40% rise from the previous year. Also, Street expects the company’s EPS for the current year to come in at $4.58, representing a growth of 11.3% year-over-year. The company has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 17.6% over the past month and 43.4% over the past year to close the last trading session at $41.72. TA is currently trading 35.4% below its 52-week high of $64.58, which it hit on November 8, 2021.
TA’s POWR Ratings reflect a strong outlook. The stock has an overall rating of A, which translates to Buy in our POWR Ratings system.
TA has a grade of A for Sentiment and Value. It has a B grade for Quality. It is ranked #2 of 46 stocks in the Specialty Retailers industry. Click here to see TA’s POWR Ratings for Growth, Stability, and Momentum.
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ARC shares were trading at $2.72 per share on Monday morning, down $0.09 (-3.20%). Year-to-date, ARC has declined -18.50%, versus a -12.94% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...
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