With the prolonged campaigns of central banks worldwide against inflation with interest rate hikes becoming a new normal for the market and the economy, a slowdown in the developed economies during the last quarter of 2022 and the first quarter of 2023 seems all but inevitable. However, despite such widespread pessimism, economists are still wary of forecasting a global recession.
Moreover, with China expected to rebound from an unusually weak 2022, many forecasters see global output rising by around 2%. In such a scenario, small, fundamentally strong, and well-run businesses might be best placed to benefit.
Innospec Inc. (IOSP)
IOSP develops, manufactures, blends, markets, and supplies specialty chemicals for diverse uses. The company operates through three segments: Fuel Specialties; Performance Chemicals; and Oilfield Services.
On November 8, IOSP announced its semi-annual dividend of $0.65 per common share, payable on November 28, 2022. This brings the annual dividend to $1.28 per share, which translates to an increase of 10 percent over 2021. The current dividend yield of 1.15% is comparable to the 4-year average dividend yield of 1.22%. Dividends have grown at 12.2% CAGR over the past five years.
On July 28, IOSP announced the purchase of land, which significantly increases the acreage available for future expansion at its primary US personal care manufacturing facility in North Carolina.
For the third quarter of the fiscal year ended September 30, 2022, IOSP’s total revenues increased 36.4% year-over-year to $513 million, while the operating income increased 59.6% year-over-year to $50.1 million. During the same period, the company’s adjusted net income came in at $43.5 million or $1.74 per share, up 52.6% and 51.3% year-over-year, respectively.
Analysts expect IOSP’s revenue and EPS for the fiscal year ending December 2022 to increase 30.7% year-over-year to $1.94 billion and $6.28, respectively. The company has further impressed by surpassing consensus EPS estimates in each of the four trailing quarters.
The stock has gained 18.7% over the past month and 20.3% year-to-date to close the last trading session at $112.66.
IOSP’s stellar prospects have earned it an overall rating of A, which translates to a Strong Buy in our proprietary POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
IOSP has a grade of B for Sentiment and Growth. Within the B-rated Chemicals industry, it is ranked #9 of 87 stocks.
Click here to see additional POWR Ratings for Value, Stability, Quality, and Momentum for IOSP.
REV Group, Inc. (REVG)
REVG is involved in the design, manufacture, and distribution of specialty vehicles and related aftermarket parts and services. The company’s customized vehicle solutions cater to diverse applications, such as essential needs for public services, commercial infrastructure, and consumer leisure. It operates through three segments: Fire & Emergency; Commercial; and Recreation.
On September 28, REVG announced that Dallas Fort Worth International Airport (DFW) had ordered 22 40′ Axess CNG-powered buses and four new 40′ AxessEVO-BE™ Battery Electric buses, manufactured by its subsidiary, ElDorado National (California), Inc. or ENC. Such buses are in operation at 33 airports around the country. This development reflects the company’s portfolio of increasingly sought-after clean mobility solutions.
During the third quarter of 2022, REVG repurchased approximately 2.1 million of its common shares for $24.1 million at an average purchase price of $11.16 per share, thereby increasing the intrinsic value of its outstanding shares.
During the third quarter of the fiscal year ended July 31, 2022, REVG’s net sales increased slightly to $594.8 million. During the same period, the company’s adjusted EBITDA and adjusted net income came in at $29.5 million and $14.3 million, respectively. As a result, its adjusted quarterly EPS came in at $0.24.
REVG’s total assets stood at $1.33 billion as of July 31, 2022, compared to $1.24 billion as of October 31, 2021.
REVG’s revenue and EPS for the fiscal ending October 2023 are expected to increase 1.8% and 44.6% year-over-year to $2.35 billion and $1.14, respectively. The stock has gained 7.3% over the past month and 18.1% over the past six months to close the last trading session at $14.05.
REVG has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. It has a grade B for Growth, Value, and Quality.
REVG is ranked #7 of 61 stocks in the Auto & Vehicle Manufacturers industry.
Click here to see additional ratings for REVG’s Stability, Momentum, and Sentiment.
Overseas Shipholding Group, Inc. (OSG)
As an energy transporter, OSG owns and operates a fleet of oceangoing vessels engaged in transporting crude oil and petroleum products. The company charters its vessels to customers for voyages for specific periods at fixed daily amounts through time charters and for specific voyages at spot rates.
On November 15, OSG announced that it had agreed to purchase five million shares of the company’s common stock from Cyrus Capital at $2.86 per share for a total of $14.30 million. The transaction, demonstrating the company’s confidence in its prospects, was supposed to be completed on the same day.
Sam Norton, the President and CEO of OSG, stated, “The price paid in this share purchase equates to an enterprise value of roughly 4.5 times expected 2022 adjusted EBITDA, an implied valuation which we consider to be very attractive.”
During the third quarter of the fiscal year ended September 30, 2022, OSG’s shipping revenues increased 31% year-over-year to $123.06 million, while its operating income came in at $22.43 million, compared to an operating loss of $5.64 million during the previous-year quarter.
During the same period, the company’s net income came in at $13.25 billion or $0.15 per share, compared to a net loss of $16 million or $0.18 per share during the third quarter of last fiscal.
The stock has gained 4.3% over the past month and 53.1% year-to-date to close its last trading session at $2.94.
OSG’s strong fundamentals are reflected in its overall A rating, which translates to a Strong Buy in our proprietary rating system. It also has grade A for Momentum and Quality and grade B for Growth, Value, and Sentiment.
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IOSP shares were trading at $111.80 per share on Wednesday afternoon, down $0.86 (-0.76%). Year-to-date, IOSP has gained 25.27%, versus a -14.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Santanu Roy
Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...
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