The benchmark indexes have experienced wild price swings due to concerns over the Fed’s aggressive interest rate hikes and two consecutive quarters of negative economic growth. This has led to many quality stocks trading at bargain prices.
Despite slightly cooling off in July, inflation remains at an elevated level. Also, the jobs rose more than expected in July. These may prompt the Fed to maintain its hawkish stance, leading to further market volatility.
Amid this backdrop, investors looking for bargains could consider investing in Micron Technology, Inc. (MU) and AstroNova, Inc. (ALOT), as these fundamentally sound stocks are currently trading at discounts to their peers.
Micron Technology, Inc. (MU)
MU is engaged in the designing, manufacturing, and selling of memory and storage products internationally. The company operates through Compute and Networking Business Unit, Mobile Business Unit, Storage Business Unit, and Embedded Business Unit segments.
On August 9, 2022, MU announced an investment of $40 billion in leading-edge memory manufacturing in the United States. The company expects to begin production in the second half of the decade, ramping overall supply in line with industry demand trends.
MU President and CEO Sanjay Mehrotra said, “This legislation (CHIPS and Science Act) will enable Micron to grow domestic production of memory from less than 2% to up to 10% of the global market in the next decade, making the U.S. home to the most advanced memory manufacturing and R&D in the world.”
For the third quarter ended June 2, 2022, MU’s revenue increased 16.4% year-over-year to $8.64 billion. The company’s non-GAAP gross profit rose 28.6% year-over-year to $4.10 billion, while its non-GAAP operating income increased 33% from the prior-year value to $3.14 billion. Its non-GAAP net income came in at $2.94 billion, up 35.2% year-over-year. Also, its non-GAAP EPS grew 37.8% year-over-year to $2.59.
Analysts expect MU’s EPS and revenue for fiscal 2022 (ending August 31, 2022) to come in at $8.37 and $31.05 billion, indicating a 38.1% and 12% year-over-year growth, respectively. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each trailing four quarters. The stock has gained 5.1% over the past month to close the last trading session at $64.70.
In terms of its forward EV/EBITDA, MU is trading at 3.93x, 70.4% lower than the industry average of 13.28x. Its forward EV/EBIT multiple of 6.41x is 62.3% lower than the industry average of 17x.
MU’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to a 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 Value and a B for Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #37 of 95 stocks. To see additional POWR Ratings of MU for Growth, Momentum, Stability, and Sentiment, click here.
AstroNova, Inc. (ALOT)
ALOT manufactures and distributes a range of specialty printers and data acquisition and analysis systems. The company operates through two segments: Product Identification; and Test & Measurement. It sells its products via its authorized and third-party dealers and representatives.
On August 9, 2022, ALOT acquired Astro Machine. ALOT’s President and CEO Greg Woods said, “Astro Machine’s products and technologies are a great fit. We believe that this transaction brings synergistic product design and material handling expertise, expands our U.S.-based manufacturing capabilities, and adds complementary channels to market that will enhance our ability to scale the combined business and capitalize on cross-selling opportunities.”
In the fiscal first quarter (ended April 30, 2022), ALOT’s net revenue increased 6.6% year-over-year to $31.01 million. Its operating expenses declined 1.8% year-over-year to $9.97 million. The company’s operating income rose 3.9% from the year-ago value to $764K. Also, its total current assets stood at $65.39 million, representing an increase of 2.5%, compared to $63.77 million for the fiscal year ended January 31, 2022.
The consensus revenue estimate of $125.03 million for fiscal 2023 represents a 6.4% increase from the same period last year. Shares of ALOT have declined 2.3% over the past month, closing the last trading session at $11.98.
In terms of its trailing-12-month EV/S, ALOT is trading at 0.79x, 75.5% lower than the industry average of 3.24x. Its trailing-12-month Price/Sales multiple of 0.72x is 77.4% lower than the industry average of 3.17x.
ALOT’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Value and Sentiment and a B for Momentum and Quality. Also, it is ranked first of 49 stocks in the B-rated Technology – Hardware industry. Click here to see the other ratings of ALOT for Growth and Stability.
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MU shares were trading at $63.86 per share on Tuesday afternoon, down $0.84 (-1.30%). Year-to-date, MU has declined -31.22%, versus a -8.87% 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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