The U.S. economy grew at an annual rate of 2.9% in the third quarter of fiscal 2022, despite the stubbornly high inflation and high borrowing prices.

Additionally, the November jobs report considerably exceeded expectations, with nonfarm payrolls rising by 263,000 for November, beating Dow Jones’ estimate of 200,000. Low unemployment and consistent hiring are indicative of a resilient economy.

Furthermore, Sam Stovall, chief investment strategist for CFRA Research, said, “At this point, the stock market is assuming that we won’t go into recession or, if we do, that it will be mild and that the Fed will likely cut interest rates in the second half of 2023.”

However, as uncertainties remain, investors could scoop up these fundamentally sound penny stocks, ARC Document Solutions, Inc. (ARC) and Good Times Restaurants Inc. (GTIM), instead of the pricey options.

ARC Document Solutions, Inc. (ARC)

Digital printing company ARC provides digital printing and document-related services in the United States. It provides managed print services, cloud-based document management software, and other digital hosting services.

On November 2, 2022, Suri Suriyakumar, Chairman and CEO, said, “The strategy we put in place during 2019 created opportunities for ARC to grow in virtually any environment, primarily because we made diversity and resilience the keys to our success.”

ARC’s trailing-12-month EV/Sales of 0.64x is 63.37% lower than the industry average of 1.74x. Its trailing-12-month Price/Sales multiple of 0.44 is 66.8% lower than the industry average of 1.33.

ARC’s trailing-12-month gross profit margin of 33.20% is 13.67% higher than the 29.20% industry average. Its trailing-12-month levered FCF margin of 9.77% is 181.76% higher than the 3.47% industry average.

ARC’s net sales came in at $73.14 million for the third quarter that ended September 30, 2022, up marginally year-over-year. Its net income increased 18.1% year-over-year to $3.74 million. In addition, its EPS increased 12.5% year-over-year to $0.09.

Over the past year, the stock has gained 13.6℅ to close the last trading session at $3.

ARC’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

ARC has an A grade for Value, Sentiment, and Quality. In the B-rated Outsourcing – Business Services industry, it is ranked first among 44 stocks. Click here for the additional POWR Ratings for Growth, Momentum, and Stability for ARC.

Good Times Restaurants Inc. (GTIM)

GTIM engages in the restaurant business in the United States. The company operates and franchises Good Times Burgers & Frozen Custard, and Bad Daddy’s Burger Bar.

In terms of trailing-12-month EV/ Sales, GTIM is trading at 0.54x, 52.3% lower than the industry average of 1.13x. Its trailing-12-month Price/Sales multiple of 0.22 is 74% lower than the industry average of 0.85.

GTIM’s trailing-12-month levered FCF margin of 4.23% is 229.24% higher than the 1.29% industry average.

GTIM’s total net revenues came in at $36.50 billion for the third quarter that ended June 28, 2022, up 7.5% year-over-year. Its restaurant sales increased 7.6% year-over-year to $36.27 billion. Also, its Bad Daddy’s Burger Bar restaurant sales increased 11.3% year-over-year to $27.17 million.

Street expects GTIM’s EPS to grow 30% per annum for the next five years. GTIM’s shares have lost 3.2℅ intraday to close the last trading session at $2.41

GTIM has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system.

It has an A grade for Value and a B for Growth, Momentum, Sentiment, and Quality. GTIM is ranked #1 among 47 stocks in the A-rated Restaurants industry. Click here for the additional POWR Ratings for GTIM.

ARC shares were trading at $2.86 per share on Tuesday afternoon, down $0.14 (-4.67%). Year-to-date, ARC has declined -12.51%, versus a -16.33% rise in the benchmark S&P 500 index during the same period.

About the Author: Rashmi Kumari

Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions. More...

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