The POWR Ratings have been calculated for the second week of February. Plenty of stocks were upgraded, yet there were also some notable downgrades.
The POWR Ratings downgrades provide valuable insight into stocks that could decline in the days, weeks, and months ahead. You can use these ratings to your advantage by avoiding these stocks or reducing the size of your investments in them.
Below, we provide a look at three recently downgraded stocks. The following companies are worthy of additional scrutiny and even the potential removal from your portfolio moving forward: YRC Worldwide (YRCW), Toll Brothers (TOL), and 8×8 (EGHT).
YRC Worldwide (YRCW)
YRCW, headquartered in beautiful Overland Park, Kansas, serves as a holding company for a group of LTL companies. LTL is an acronym short for less than truckload. In fact, YRCW has one of the most expansive LTL networks on the continent, providing service nationally, regionally, locally, and even internationally.
YRCW has a forward P/E ratio of 102.20. This is quite a concerning figure because the company is not a tech stock and doesn’t have explosive growth. YRCW has a D grade in the Sentiment component of the POWR Ratings and C grades in the Quality, Stability, and Momentum components. If you are curious as to how YRCW fares in terms of its Value and Growth components, click here. Out of the 21 publicly traded companies in the Trucking Freight industry, YRCW is ranked 20th. You can find the top stocks in the Trucking Freight industry by clicking here.
YRCW shares recently dipped 15% following its underwhelming quarterly results. The company reported a quarterly loss of 37 cents, yet analysts anticipated a loss of 13 cents per share. YRCW’s revenue came in a bit higher than expected, yet it was not enough to enthuse investors. The bottom line is YRCW’s brass is struggling to refocus its business on regional LTL services, making this a difficult stock to invest in for the foreseeable future.
Toll Brothers (TOL)
TOL designs, builds, and coordinates the financing of single-family detached/attached houses. However, the company’s homes are in luxury communities. Though TOL also has operations that convert rental apartment buildings, most of its metaphorical eggs are in the luxury housing basket.
TOL has a D grade in the Sentiment component of the POWR Ratings and C grades in the Quality, Stability, and Momentum components. If you would like to learn more about how TOL fares in the Value and Growth components, click here. TOL is ranked 21st out of the 24 publicly traded companies in the Homebuilders industry. Investors who are interested in finding the top stocks in this industry can do so by clicking here.
TOL’s fourth-quarter numbers reveal that the stock’s net profit was down, coming in slightly less than $199 million. Though the housing market is currently strong, there is a chance the party will end at some point in 2021. The mere fact that TOL dropped nearly 10% after its earnings and revenue beat expectations makes it clear that investors are growing increasingly bearish on this stock.
EGHT provides unified communications through the cloud. The company’s platform integrates throughout the cloud, devices, and applications to provide valuable insights that boost productivity. EGHT data centers are positioned in diverse geographic sites around the world.
EGHT has a D grade in the Quality component of the POWR Ratings and C grades in the Sentiment, Value, and Stability Components. You can find out more about how EGHT fares in the Growth, Momentum, and other POWR Ratings components by clicking here.
Of the 47 stocks in the Internet – Services industry, EGHT is ranked 33rd. Investors can find top stocks in the Internet – Services industry by clicking here.
Analysts are bearish on EGHT at its current price. Average out the price targets of the 16 analysts who cover EGHT, and you will find the expectation is for the stock to reach $20.95 per share. If EGHT falls to this price, it will have declined by more than 41%.
EGHT might have a difficult future ahead, considering that it is competing against Twilio (TWLO), FIve9 (FIVN), and RingCentral (RNG). These heavyweights are likely to continue stealing market share from EGHT in the months and years ahead. Add in the fact that EGHT failed to take advantage of the spike in demand for its industry’s services during the pandemic, and you have reduced top-line growth sure to sour investors moving forward. Investors should avoid EGHT until its cash exceeds its debt, and it proves it can generate positive free cash flow.
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YRCW shares were trading at $5.11 per share on Wednesday morning, down $1.09 (-17.58%). Year-to-date, YRCW has gained 15.35%, versus a 4.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Patrick Ryan
Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...
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