High inflation, higher interest rates, and the threat of a U.S. recession has suppressed investor appetite for stocks this year. Moreover, as China faces its most severe test of the pandemic and fears that it could resume stricter measures to fight COVID-19 are also weighing down the stock market.

Moreover, the Fed approved a fourth consecutive three-quarter point interest rate increase this month, raising its short-term borrowing rate to a range of 3.75%-4% to combat the soaring prices. While inflation showed signs of cooling in October, it’s far from the Fed’s target of 2%.

In addition, inflation expectations for the year ahead rose to 5.9%, up half a percentage point from September, according to the New York Fed’s monthly Survey of Consumer Expectations. The three-year expectations also accelerated to 3.1%, while the five-year outlook rose to 2.4%, from 2.9% and 2.2%, respectively.

Given this backdrop, fundamentally weak stocks Canoo Inc. (GOEV), Bed Bath & Beyond Inc. (BBBY), and ToughBuilt Industries, Inc. (TBLT) might be best avoided now.

Canoo Inc. (GOEV)

GOEV designs, engineers, develops and manufactures electric vehicles for commercial and consumer markets. The company offers lifestyle delivery vehicles, lifestyle vehicles, multi-purpose delivery vehicles, and pickups, catering to small businesses, independent contractors, tradespeople, utilities, and service technicians.

In terms of its forward EV/Sales, GOEV is currently trading at 289.59x, which is significantly higher than the industry average of 1.08x. Its forward Price/Sales multiple of 250.95 is remarkably higher than the industry average of 0.86.

GOEV’s loss from operations rose 2.2% year-over-year to 109.34 million for the third fiscal quarter ended September 30, 2022. The company’s net loss and comprehensive loss rose 45.5% from the prior-year quarter to $117.71 million, while its net loss per share widened 22.9% year-over-year to $0.43.

GOEV’s EPS for the current fiscal year ending December is expected to be negative $1.37. Moreover, it has failed to surpass its EPS estimate in three of its trailing four quarters.

Over the past year, the stock has fallen 88.4% to close the last trading session at $1.16. It has fallen 68.3% over the past three months. GOEV has a 24-monthly beta of 1.46.

GOEV’s POWR Ratings reflect its weak fundamentals. The stock has an overall F rating, equating to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has an F grade for Value, Stability, and Quality. It is ranked #52 out of 61 stocks in the D-rated Auto & Vehicle Manufacturers industry.

To see additional POWR ratings for GOEV for Momentum, Growth, and Sentiment, click here.

Bed Bath & Beyond Inc. (BBBY)

BBBY operates a chain of retail stores. The company sells a range of domestic merchandise, home furnishings, and other juvenile products. The company owned more than 953 stores as of February 26, 2022, and offers its products through various websites and applications.

BBBY’s forward EV/Sales multiple of 0.62 is 42.5% below the industry average of 1.08. In terms of its forward Price/Sales, the stock is currently trading at 0.05x, 94.6% below the industry average of 0.86x.

BBBY’s net sales declined 28% year-over-year to $1.43 billion for the second quarter that ended August 27, 2022. Its non-GAAP net loss came in at $256 million, compared to a non-GAAP net income of $4 million in the year-ago period. In addition, its adjusted loss per share came in at $3.22, compared to an adjusted EPS of $0.04.

Analysts expect BBBY’s EPS to decline 695% year-over-year to a negative $8.59 in the current fiscal year ending February 2023, while its revenue is expected to decrease 23.3% year-over-year to $6.03 billion in the current year. Additionally, the company has failed to surpass its revenue estimate in three of the trailing four quarters.

BBBY has declined 86.6% over the past year to close its last trading session at $3.11. The stock has plunged 78.7% year-to-date. It has a 24-month beta of 1.89.

It’s no surprise that BBBY has an overall rating of F, which translates to a Strong Sell in our POWR Ratings system. It also has a grade of F for Stability and Sentiment and a D for Quality and Momentum. The stock is ranked #57 out of 60 in the Home Improvement & Goods industry.

In addition to the POWR Ratings grades just highlighted, you can see the BBBY ratings for Value and Growth.

ToughBuilt Industries, Inc. (TBLT)

TBLT designs, develops, manufactures, and distributes home improvement and construction products for the building industry. It offers its products under the TOUGHBUILT brand through various home improvement big box stores, professional outlets, and direct marketing to construction companies and trade or wholesale outlets.

On November 17, TBLT announced that it had closed its previously announced private placement with several institutional investors for the issuance and sale of 2.619,911 shares of common stock and preferred investment options to purchase up to 10,619,911 shares of common stock at an offering price of $2.86 per share and accompanying preferred investment options, priced at-the-market under Nasdaq rules.

In terms of its forward EV/Sales, TBLT is currently trading at 0.52x, which is 52.4% lower than the industry average of 1.08x. Its forward Price/Sales multiple of 0.44 is 48.8% lower than the industry average of 0.86.

For the fiscal third quarter of 2022 ended September 30, TBLT’s total operating expenses increased 3.6% year-over-year to $17.46 million. Its interest expense amounted to $548.42 thousand, while its loss from operation came in at $9.54 million.

Street revenue estimate for the fiscal fourth quarter (ending December 2022) of $21.50 million reflects a decline of 12.9% year-over-year. Likewise, its EPS is estimated to be negative $0.87 for the same quarter. TBLT has also failed to meet its consensus EPS estimates in each of the trailing four quarters.

The stock has fallen 96% over the past year to close its last trading session at $2.54. It has declined 47.6% over the three months. TBLT has a 24-month beta of 3.57.

This grim prospect is reflected in TBLT’s POWR Ratings. The stock has an overall D rating, equating to Sell in our proprietary rating system. TBLT has an F grade for Stability and Quality. It is ranked #72 out of 80 stocks in the Industrial – Machinery industry.

Click here to see the additional POWR Ratings for TBLT for Growth, Value, Momentum, and Sentiment.

GOEV shares fell $0.05 (-4.31%) in premarket trading Tuesday. Year-to-date, GOEV has declined -84.97%, versus a -15.96% 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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