Growth stocks, primarily from the technology sector, that skyrocketed amid the coronavirus pandemic have been selling-off lately as investors rotate out of them and into undervalued turnaround candidates in the economy’s recovery phase. This is evidenced by the SPDR Portfolio S&P 500 Growth ETF’s (SPYG) 2.8% decline over the past month versus the SPDR Portfolio S&P 500 Value ETF’s (SPYV) 5.7% gain.
However, despite the recent sell-off, most pandemic winners have yet to trade at reasonable valuations. Conversely, a new set of companies are emerging as potential growth stocks for the post-pandemic world. These are essentially companies that are poised to benefit significantly from a fast-paced economic recovery and an at least partial return by people to “analog” lifestyles. The IMF projects the global economy will grow 5.5% this year, after an estimated 3.5% contraction last year.
Because a rotation to these stocks has just begun, many of these names are trading at discounted valuations. PulteGroup, Inc. (PHM), Tupperware Brands Corporation (TUP), and Ironwood Pharmaceuticals, Inc. (IRWD) are three such stocks. They exhibit solid growth attributes and are currently trading at a discount to their peers. So, we think betting on them could be very rewarding.
PulteGroup, Inc. (PHM)
Based in Georgia, PHM is one of America’s largest homebuilding companies with operations in more than 40 markets nationwide. Through its brand portfolio, which includes Centex, Pulte Homes, Del Webb, DiVosta Homes, American West and John Wieland Homes and Neighborhoods, the company offers various home designs, including single-family detached, townhouses, condominiums, and duplexes. It operates through two segments: Homebuilding and Financial Services.
In January, PHM announced plans to enter the Denver market and to expand into the Triad area of North Carolina. This strategic expansion should provide the company another avenue of growth by extending its high-returning operating model into important new housing markets.
PHM has been witnessing a surge in demand for new homes and continues to benefit from low mortgage rates, a limited supply of homes for sale, and an increasing desire for homeownership and single-family living. PHM’s total revenues have increased 5.8% year-over-year to $3.19 billion in the fourth quarter ended December 31, 2021. Its operating margin has improved 200 basis points from its year-ago value to 15.8%, while its EPS has risen 32.8% to $1.62 over the same period.
PHM’s revenues have increased at a CAGR of 8.8% over the past three years, while its EPS has risen at a CAGR of 53.1% over the same period. The company’s impressive track record positions it well to emerge as a leading player in the homebuilding industry.
Analysts expect PHM’s revenues to grow 27.5% year-over-year to $2.93 billion in the current quarter (ending March 31, 2021). A consensus EPS estimate of $1.23 in the first quarter represents a 66.2% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat consensus Street estimates in each of the trailing four quarters. The stock has gained 13.9% year-to-date and is trading 7.92x its forward non-GAAP p/e, 59.8% lower than the industry average 19.72x.
PHM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
PHM has a B grade for Quality, Value, and Momentum. Within the B-rated Homebuilders industry, it is ranked #3 out of 26 stocks.
In total, we rate PHM on eight different levels. Beyond what we’ve stated above, we have also given PHM grades for Growth, Stability, and Sentiment. Get all PHM’s ratings here.
Tupperware Brands Corporation (TUP)
TUP is a leading global consumer products company that manufactures and markets design-centric preparation, storage and serving solutions for the kitchen and home under the Tupperware brand. The company also manufactures and distributes beauty and personal care products, skin care, cosmetics, toiletries, fragrances, and nutritional products.
This month , TUP added three new members to its Board of Directors: Deborah Ellinger, James Fordyce and Timothy Minges. These seasoned executives bring deep experience in consumer products and services, direct selling, technology, and digitization, combined with international leadership across several industries.
TUP’s net sales have increased 17.4% year-over-year to $489.60 million in its fiscal fourth quarter ended December 26, 2020. Its operating income has improved 558.6% from its year-ago value to $117.30 million, while its EPS has risen 127.9% to $0.41 over the same period.
Analysts expect TUP’s revenues to grow 7.9% year-over-year to $1.88 billion in its fiscal 2021 (ending December 31). A consensus EPS estimate of $3 for the current year represents a 33.9% improvement from its year-ago value. The stock has gained 2.4% over the past six months and is trading 9.04x its forward non-GAAP p/e, which is 54.2% lower than the industry average 19.72x.
It is no surprise that TUP has an overall B rating, which equates to Buy in our POWR Ratings system. TUP has an A grade for Quality and Growth, and a B for Value and Momentum. In the 63-stock A-rated Home Improvement & Goods industry, it is ranked #12.
Click here to see the additional POWR Ratings for TUP (Stability and Sentiment).
Ironwood Pharmaceuticals, Inc. (IRWD)
IRWD is a GI-focused healthcare company. It develops and commercializes linaclotide under the LINZESS trademark, the U.S. branded prescription market leader for adults with irritable bowel syndrome.
Last December, the Chinese National Healthcare Security Administration (NHSA) added LINZESS to its 2020 reimbursement list. Based on this this, IRWD expects a modest ramp-up in LINZESS net sales in China (including Hong Kong and Macau) in 2021.
IRWD’s total LINZESS prescription demand increased 8% year-over-year to 38 million in the fourth quarter ended December 31, 2020. Its adjusted EBITDA has risen 21% from its year-ago value to $65.95 million, while its non-GAAP EPS has risen 20% to $0.36 over the same period. IRWD’s revenues have increased at a CAGR of 9.3% over the past three years.
Analysts expect IRWD’s revenues to grow 12.8% year-over-year to $90.17 million in the current quarter (ending March 31, 2021). A consensus EPS estimate of $0.20 in the first quarter represents a 400% improvement from the year-ago value. The company has an impressive earnings surprise history; it beat consensus Street estimates in three of the trailing four quarters. The stock has gained 15.9% over the past six months and is trading 11.72x its forward non-GAAP p/e, which is 51.3% lower than the industry average 24.08x.
IRWD’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our rating system. IRWD has an A grade for Value and Quality, and B for Growth. It is currently ranked #17 of 239 stocks in the Medical – Pharmaceuticals industry.
We also have given IRWD grades for Momentum, Stability, and Sentiment. Get all IRWD’s ratings here.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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PHM shares were trading at $49.46 per share on Thursday afternoon, down $1.53 (-3.00%). Year-to-date, PHM has gained 15.03%, versus a 5.85% rise in the benchmark S&P 500 index during the same period.
About the Author: Rishab Dugar
Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...
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