Analysts expect the economy to grow faster in the fourth quarter, based on favorable trends in the third quarter. According to the Bureau of Economic Analysis (BEA), Gross Domestic Income (GDI) grew 7.6% year-over-year in the third quarter of 2021.
Also, consumer spending has increased as we enter the holiday season despite high inflation. Goods and services purchases have surged 1.3%, the highest since March. The spending has topped projections in-part because consumers began their holiday shopping early this year. In addition, new jobless claims fell to a 52-year low, declining to 199,000, indicating broad-based improvement in the labor market.
Given this setting, we believe fundamentally strong stocks Pfizer Inc. (PFE) and Ryerson Holding Corporation (RYI) could soar in price. These stocks look significantly undervalued at their current price levels.
Pfizer Inc. (PFE)
New York City-based PFE is a well-known developer and distributor of biopharmaceutical products that include medicines, vaccines, and other therapies. The company developed the Pfizer-BioNTech COVID-19 vaccine with BioNTech SE (BNTX).
On November 19, PFE and BNTX announced that the United States Food and Drug Administration (FDA) had expanded the emergency use authorization (EUA) of the Pfizer-BioNTech COVID-19 vaccine booster shots to include individuals aged 18 or older. This should add substantially to PFE’s revenue stream.
On November 17, PFE announced its successful acquisition of an immune-oncology company, Trillium Therapeutics. The acquisition is expected to expand PFE’s portfolio and includes biologics to enhance the ability of the body’s immune system to detect and destroy cancer cells.
In terms of its forward non-GAAP P/E, PFE is currently trading at 12.6x, which is 41.1% lower than the 21.4x industry average. Its 3.65 forward Price/Sales multiple is 47.9% lower than the 7.01 industry average.
For its fiscal third quarter, ended October 3, PFE’s revenue increased 134.4% year-over-year to $24.09 billion. Its adjusted income rose 132.7% from the prior-year quarter to $7.69 billion, while its adjusted EPS came in at $1.34, up 127.1% from the same period last year.
The Street’s $44.42 EPS estimate for the next year (fiscal 2022) indicates a 16.2% increase from the current year. And the $786.01 billion consensus revenue estimate for the coming year reflects a 6.4% year-over-year improvement. The stock has gained 44.1% in price year-to-date.
PFE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
PFE has a Growth grade of A, and a Value, Sentiment, and Quality grade of B. It is ranked #8 out of 196 stocks in the Medical – Pharmaceuticals industry.
In addition to the POWR Rating grades we have stated above, one can see PFE ratings for Momentum and Stability here.
Ryerson Holding Corporation (RYI)
Chicago-based RYI is an industrial metals processing and distributing company. The company’s offerings include carbon steel, stainless steel, alloy steel, nickel, aluminum, and red metals in various shapes and forms.
On October 8, RYI announced that its completely owned subsidiary, Central Steel & Wire, had signed a lease for a service-center facility to establish its operational hub in University Park. The new facility is expected to modernize and help grow the company’s business.
In September, the company announced that it had acquired an Ohio-based toll processor of stainless steel, aluminum, and nickel alloy products, Specialty Metals Processing. The acquisition is expected to provide RYI value-added capabilities and further strengthen its portfolio.
RYI’s 3.81 forward non-GAAP P/E multiple is 73.9% lower than the 15.6 industry average. And in terms of its forward Price/Sales, RYI is currently trading at 0.16x, which is 88.8% lower than the 1.43x industry average.
RYI’s revenues increased 89.4% year-over-year to $1.58 billion in its fiscal third quarter, ended September 30. Its adjusted net income and adjusted EPS improved 966.4% and 948.4%, respectively, from the prior-year quarter to $126.90 million and $3.25.
The $2.16 consensus EPS estimate for the current quarter (ending December 2021) indicates a 1,370.6% year-over-year increase. And the $1.39 billion consensus revenue estimate for the current quarter reflects a 63.5% improvement from the prior-year quarter. The stock has gained 72.3% in price year-to-date.
It is no surprise that RYI has an overall A rating, which translates to Strong Buy in our POWR Rating system.
RYI has an A grade for Growth and a B for Value, Momentum, Sentiment, and Quality. In the 35-stock Industrial – Metals industry, it is ranked #1.
To see the additional POWR Rating for Stability for RYI, click here.
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PFE shares rose $0.26 (+0.49%) in premarket trading Friday. Year-to-date, PFE has gained 49.73%, versus a 23.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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