Last year, the broader equity indexes witnessed their worst performances since 2008, with an inflation-driven market rout. Despite this, the Fed has vowed to stay adamant with its aggressive stance to quell inflation, taking the ‘terminal rate’ to a target range of 5-5.25%, exacerbating fears of a global recession.
Moreover, this environment has triggered a shift from growth stocks to value stocks as investors seek shelter in high-quality businesses with strong fundamentals and low share prices. Additionally, since value stocks tend to be low-volatility investments, they can provide stability for portfolios during market downturns while still offering potential upside when markets rebound.
Value stocks outperformed growth in 2022 as central banks kept interest rates elevated. Since a higher interest rate environment will likely continue, strategists at Goldman Sachs expect value stocks to keep up their outperformance in 2023.
Given this backdrop, investing in shares of fundamentally sound stocks Biogen Inc. (BIIB), Dow Inc. (DOW), and Albertsons Companies, Inc. (ACI), which are trading at a discount, could be worth your attention in 2023.
Biogen Inc. (BIIB)
BIIB discovers, develops, manufactures, and delivers therapies for treating neurological and neurodegenerative diseases. It offers TECFIDERA, AVONEX, PLEGRIDY, FAMPYRA, etc., for treating MS; SPINRAZA for SMA treatment; ADUHELM for treating Alzheimer’s; and FUMADERM for the treatment of severe plaque psoriasis.
On January 04, 2023, BIIB and Alcyone Therapeutics announced their license and collaboration agreement to evaluate a novel device to improve patient experience and access to neurological ASO therapies.
Through this agreement, BIIB aims to leverage the ThecaFlex DRx system to improve the patient treatment experience and accessibility for a broader population suffering from neurological disorders, such as spinal muscular atrophy (SMA) and amyotrophic lateral sclerosis (ALS).
In the third quarter ended September 30, 2022, BIIB’s income before income tax expense and equity in loss of investee, net of tax, increased 370.7% year-over-year to $1.37 billion. The total cost and expenses declined 54.3% year-over-year to $1.14 billion. Its net income attributable to BIIB improved 244.7% from the year-ago value to $1.13 billion, while its EPS came in at $7.84, representing a 253.2% year-over-year improvement.
In terms of forward non-GAAP P/E, BIIB is currently trading at 15.88x, 16.2% lower than the industry average of 18.95x. Its forward EV/EBITDA multiple of 10.43 is 21.6% lower than the industry average of 13.30x. In addition, BIIB’s forward EV/EBIT ratio of 12.49 is 28.5% lower than the industry average of 17.47.
Analysts expect BIIB’s EPS to increase 3% year-over-year to $3.49 in the fourth quarter ended December 31, 2022. BIIB has surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Shares of BIIB have gained 30.8% over the past nine months to close the last trading session at $271.59.
BIIB’s strong fundamentals are reflected in its POWR Ratings. According to our proprietary rating system, it has an overall A rating, which translates to a Strong Buy. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has an A grade for Value and Quality and a B for Sentiment. It is ranked #5 out of 385 stocks in the Biotech industry. Click here to see the other ratings of BIIB for Growth, Momentum, and Stability.
Dow Inc. (DOW)
DOW is the holding company for the Dow chemical company and its subsidiaries. The company’s portfolio of plastics, industrial intermediates, coatings, and silicones businesses delivers science-based products and solutions for its customers in various market segments like packaging, infrastructure, mobility, and consumer care.
On December 08, 2022, DOW launched SILASTIC™ SA 994X Liquid Silicone Rubber (LSR) series as its commitment to innovate for smarter, safer, and more sustainable technologies for the automotive industry. This launch builds on the previously announced capacity expansions aligned with the mobility and transportation market.
DOW’s net sales increased 10.9% year-over-year to $45.04 billion for the nine-month period ended September 30, 2022. The company’s net income and EPS amounted to $3.99 billion and $ 5.41 for the same period. Also, its total current liabilities came in at $12.32 billion for the quarter ended September 30, 2022, compared to $13.23 billion for the fiscal year ended December 31, 2021.
In terms of forward non-GAAP P/E, DOW is currently trading at 8.20x, 35.3% lower than the industry average of 12.67x. Its forward EV/Sales multiple of 0.87 is 40.6% lower than the industry average of 1.47. In addition, its forward EV/EBITDA multiple of 5.23 is 29% lower than the industry average of 7.37x
Street expects DOW’s revenue for fiscal 2022 to increase 4.2% year-over-year to $57.25 billion. It has surpassed the Street’s EPS estimates in three of the trailing four quarters. The stock has declined 14.9% over the past three months to close the last trading session at $52.91.
The company has an overall rating of B, which translates to Buy in our proprietary rating system. It is no surprise that DOW has an A grade for Value and a B for Quality. In the B-rated Chemicals industry, it is ranked #39 of 90 stocks.
Beyond what we’ve stated above, we have also given DOW grades for Growth, Momentum, Stability, and Sentiment. Get all DOW ratings here.
Albertsons Companies, Inc. (ACI)
ACI is engaged in the operation of food and drug stores in the United States. It offers grocery, general merchandise, health and beauty care products, pharmacy, fuel, and other items and services.
On October 14, 2022, Kroger Co. (KR) and ACI announced a definitive merger agreement to establish a national footprint and unite around Kroger’s Purpose to Feed the Human Spirit. The companies intend to invest $1 billion to continue raising associate wages and benefits and enhance customer experience. On top of it, ACI will pay a special cash dividend of up to $4 billion to its shareholders.
Chan Galbato, Co-Chair of the ACI board of directors, said, “This transaction with Kroger provides substantial value to shareholders and exciting opportunities for associates to be part of a combined organization with the ability to better support the lives and health of millions of Americans.”
ACI’s net sales and other revenue increased 8.6% year-over-year to $17.92 billion in the fiscal second quarter ended September 10, 2022. Its gross margin grew 6.1% from the year-ago value to $5 billion, while its operating income was up 9.3% year-over-year to $531 million.
The company’s adjusted net income came in at $418.30 million, representing an increase of 13.2% year-over-year. Also, its adjusted net income per share rose 12.5% year-over-year to $0.72. In addition, the ACI’s adjusted EBITDA increased 8.6% from the prior-year value to $1.05 billion.
In terms of forward non-GAAP P/E, ACI is currently trading at 6.94x, 63.1% lower than the industry average of 18.77x. Its forward EV/Sales multiple of 0.29 is 82.7% lower than the industry average of 1.69x. In addition, ACI’s forward Price/Sales ratio of 0.15 is 87.2% lower than the industry average of 1.14.
ACI’s revenue for the quarter ended November 30, 2022, is expected to increase 5.1% year-over-year to $17.58 billion. Its EPS is expected to increase by 8% per annum over the next five years. It has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 8.9% over the past three months to close the last trading session at $20.88.
ACI’s POWR Ratings reflect its solid prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. It has an A grade for Value and a B for Quality. In the A-rated Grocery/Big Box Retailers industry, it is ranked #6 out of 39 stocks.
In addition to the POWR Rating grades I have highlighted, you can check the other ratings of ACI for Growth, Momentum, Stability, and Sentiment here.
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BIIB shares were trading at $279.33 per share on Friday morning, up $7.74 (+2.85%). Year-to-date, BIIB has gained 0.87%, versus a 1.11% 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. More...
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