The Consumer Price Index, a broad measure of inflation, dropped from a peak of 9.1% in June to 6.5% in December. The ongoing slowdown in inflation has raised investors’ sentiment on the hope that a recession might not be inevitable after all.
Moreover, according to a New York Fed survey released on Monday, the one-year inflation outlook declined to 5%, down 0.2 percentage points from the previous month and the lowest level since July 2021. The Conference Board forecasts global real GDP to grow by 2.2% in 2023, down from 3.2% in 2022, and then rebound to 2.6% in 2024 as inflation ebbs further and monetary policy loosens.
The combination of slowing growth and cooling inflation will likely prompt the Fed to curb its rate hiking. Ellen Zentner, Chief U.S. Economist at Morgan Stanley, stated, “We expect the target range to reach a peak of 4.5% to 4.75% by January 2023, hold at that level through 2023 and then decline steadily throughout 2024.”
The U.S. economy could experience a soft landing and a tepid rebound in this scenario. Given the backdrop, investors might consider buying fundamentally sound stocks Forrester Research, Inc. (FORR) and Civeo Corporation (CVEO) in January 2023.
Forrester Research, Inc. (FORR)
FORR is an independent research and advisory firm operating through the Research; Consulting; and Events segments. Its primary subscription research product offers clients access to its research designed to inform their strategic decision-making.
In terms of forward non-GAAP P/E, FORR is trading at 15.41x, 10.1% lower than the industry average of 17.14x. The stock’s forward EV/Sales multiple of 1.28 is 26.2% below the industry average of 1.73. Also, its forward EV/EBITDA multiple of 10.33 compares to the industry average of 10.83.
In the fiscal third quarter that ended September 30, 2022, FORR’s net revenues increased 8.1% year-over-year to $127.68 million. Its adjusted income from operations grew 24.5% from the year-ago value to $15.81 million, while its adjusted net income increased 38% from the prior-year period to $10.90 million. In addition, FORR’s non-GAAP EPS came in at $0.57, registering an increase of 39% year-over-year.
The company raised its guidance for the balance of the year. For the fiscal year 2022, FORR expects total revenues of approximately $535 million to $545 million and adjusted earnings per share of approximately $2.30 to $2.40.
Analysts expect FORR’s revenue for the quarter that ended December 2022 to increase 3.7% year-over-year to $138.71 million. Its EPS for the first quarter (ending March 2023) is expected to increase 4.4% year-over-year to $0.47. It surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past month, the stock has gained 4% to close the last trading session at $36.21.
FORR’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Sentiment and Quality and a B for Value. Out of 103 stocks in the Financial Services (Enterprise) industry, it is ranked first. Click here to see FORR’s ratings for Growth, Momentum, and Stability.
Civeo Corporation (CVEO)
CVEO provides hospitality services to the natural resource industry in Canada, Australia, and the United States. The company develops lodges, villages, and mobile accommodations. It offers food, housekeeping, maintenance services, laundry, facility management and maintenance, water and wastewater treatment, power generation, communication systems, security, logistics, and camp management services.
On November 15, 2022, CVEO announced a five-year integrated services contract renewal to offer services at six villages in Western Australia. This renewal reaffirms the strength of the company’s customer relationships and high quality of hospitality services, along with expanding its scope in Australia.
In terms of forward EV/Sales, CVEO is trading at 1.01x, 41.5% lower than the industry average of 1.73x. The stock’s forward EV/EBITDA multiple of 6.08 is 43.8% below the industry average of 10.83. Also, its forward Price/Sales multiple of 0.71 compares to the industry average of 1.31.
In the fiscal third quarter that ended September 30, 2022, CVEO’s revenues increased 18.8% year-over-year to $184.23 million. Its operating income grew 79.4% from the year-ago value to $10.78 million. Its net income attributable to common shareholders improved significantly year-over-year to $5.23 million, while its adjusted EBITDA came in at $35.03 million, registering an increase of 33.8% year-over-year.
Analysts expect CVEO’s revenue to increase 14.7% year-over-year to $681.72 million in fiscal 2022 (ended December 2022). Its EPS is expected to increase by 15% per annum over the next five years. The company surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of CVEO have gained 58.6% over the past year and 29.2% over the past six months to close the last trading session at $31.88.
CVEO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Sentiment and a B for Value, Stability, and Quality. In the B-rated Outsourcing – Business Services industry, it is ranked #3 of 42 stocks. Click here to see the additional POWR Ratings of CVEO (Growth and Momentum).
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FORR shares were trading at $36.19 per share on Thursday afternoon, down $0.02 (-0.06%). Year-to-date, FORR has gained 1.20%, versus a 3.74% 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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