The stock market has already entered into bear territory due to investors’ concerns over persisting factors like the multi-decade high inflation, deepening supply chain constraints, and the possibility of the economy witnessing a recession due to the Federal Reserve’s policy tightening. The benchmark SPDR S&P 500 Trust ETF (SPY) is down 18% year-to-date. Notably, the CBOE Volatility Index (VIX) has gained 77.2% year-to-date, reflecting significant market volatility.
Many analysts expect the lingering issues to result in further market pullbacks. According to Tom Galvin, a chief investment officer with City National Rochdale, "Investors should keep their seat belts fastened. This period of volatility is not likely to be over." However, long-term investors could take advantage of the current situation and bet on stocks possessing solid growth attributes on every dip instead of sitting on the sidelines waiting for a clear direction.
It could be wise to bet on Nutrien Ltd. (NTR), Centene Corporation (CNC), Itochu Corporation (ITOCY), Steel Dynamics, Inc. (STLD), and Teck Resources Limited (TECK), which look undervalued at their current price levels and possess great upside potential.
Nutrien Ltd. (NTR)
NTR is a Canada-based provider of crop inputs and services. The company operates through four segments — Retail Ag Solutions (Retail); Potash; Nitrogen; and Phosphate. It distributes crop nutrients, crop protection products, seeds, and merchandise products worldwide through approximately 2,000 retail locations.
On May 18, 2022, NTR announced its intention to build the world’s largest clean ammonia facility of approximately $2 billion at Geismar, Louisiana. Given its expertise in low-carbon ammonia production, clean ammonia will be manufactured using innovative technology to reduce at least 90% of CO2 emissions, with full production expected by 2027. This new plant would leverage low-cost natural gas, tidewater access to world markets, and high-quality carbon capture and sequestration infrastructure at its existing Geismar facility to serve growing demand in agriculture, industrial, and emerging energy markets. This initiative fits well with its net-zero emissions goals.
NTR’s sales for its fiscal 2022 first quarter ended March 31, 2022, increased 64.4% year-over-year to $7.66 billion. The company’s gross profit came in at $1.83 billion, representing a 181.8% year-over-year improvement. Its EBIT came in at $1.89 billion for the quarter, up 1096.2% from the prior-year period. While its net earnings increased 941.4% year-over-year to $1.39 billion, its EPS grew 1031.8% to $2.49. It had $577 million in cash and cash equivalents as of March 31, 2022.
Analysts expect the company’s EPS to improve 180.3% year-over-year to $17.46 for fiscal 2022 ending December 31, 2022. The consensus revenue estimate of $40.02 billion for the same fiscal year represents a 49% rise from the prior-year period. The company’s EPS is expected to grow at a 33% rate per annum over the next five years.
Over the past three years, NTR’s revenue, EBITDA, and total assets have grown at CAGRs of 16.6%, 28.5%, and 4.8%, respectively. The stock’s 4.26x forward EV/EBITDA is 36.8% lower than the 6.74x industry average. In terms of forward Price/Cash Flow, NTR is currently trading at 4.84x, which is 29.7% lower than the 6.89x industry average. The stock has increased 42.9% over the past six months but declined 14.2% over the past month to close the last trading session at $97.02.
NTR’s POWR Ratings reflect this promising outlook. 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.
It has a B grade for Growth, Quality, and Sentiment. Click here to see the additional ratings for NTR’s Value, Stability, and Momentum. NTR is ranked #4 of 33 stocks in the Agriculture industry.
Centene Corporation (CNC)
CNC operates as a multi-national healthcare enterprise that provides programs and services to government-sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. The company provides its services through primary and specialty care physicians, hospitals, and ancillary providers, primarily through Medicaid, Medicare, and commercial products.
On May 6, 2022, CNC’s Missouri subsidiary, Home State Health, was awarded the MO HealthNet Managed Care General Plan and Specialty Plan, which allows it to continue serving multiple MO HealthNet programs, including Children's Health Insurance (CHIP) members and Medicaid expansion population across Missouri, and serve approximately 40,000 foster children and children receiving adoption subsidy assistance. This will help CNC expand its reach, deliver member-focused care, and improve health outcomes.
For its fiscal 2022 first quarter ended March 31, 2022, CNC’s total revenues increased 24% year-over-year to $37.19 billion. The company’s earnings from operations came in at $1.25 billion for the quarter, indicating an 18.9% year-over-year improvement. Its net earnings came in at $849 million, representing a 21.5% rise from the prior-year period. CNC’s EPS increased 21% year-over-year to $1.44. The company had $11.24 billion in cash and equivalents as of March 31, 2022.
Analysts expect the company’s EPS to hit $5.49 for its fiscal 2022 ending December 31, 2022, representing a 6.6% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $141.46 billion for the same fiscal year represents a 12.3% year-over-year improvement. Its EPS is expected to grow at a rate of 10.6% per annum over the next five years.
Over the past three years, the company’s revenue, EBITDA, and total assets have grown at CAGRs of 26.7%, 22.8%, and 35.2%, respectively. CNC’s 11.20x forward EV/EBITDA is 13.7% lower than the 12.99x industry average. In terms of forward Price/Cash Flow, CNC is currently trading at 10.28x, which is 37.2% lower than the 16.38x industry average. It has gained 16.4% over the past six months but lost 4.6% over the past month to close the last trading session at $84.96.
CNC’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.
It has an A grade for Growth and a B grade for Value and Sentiment. Click here to see the additional ratings for CNC (Quality, Momentum, and Stability). CNC is ranked #4 of 11 stocks in the A-rated Medical - Health Insurance industry.
Itochu Corporation (ITOCY)
Headquartered in Tokyo, Japan, ITOCY engages in trading and importing/exporting various products worldwide. The company operates through eight business segments – Textiles; Machinery; Metals & Minerals; Energy & Chemicals; Food; General Products & Realty; ICT & Financial Business; and The 8th. It diversifies by operating in satellite communication and data communication businesses.
On May 18, 2022, ITOCY and GoodFuels, a Netherlands-based advanced biofuel pioneer and energy transition partner for heavy-duty transport, partnered up to scale sustainable marine biofuel in Singapore, Japan, and Asia-Pacific. ITOCY will engage in the wholesale, distribution, and bunkering of petroleum products in both Singapore and Japan. At the same time, GoodFuels will mainly be responsible for sourcing, production, technical expertise, and brand marketing of sustainable marine biofuels with a presence in the Netherlands and Singapore. This will enable them to build the market and the supply chain necessary for the wider adoption of marine biofuel.
For its fiscal 2022 full year ended March 31, 2022, ITOCY’s total revenues increased 18.6% year-over-year to $100.44 billion. The company’s gross trading profit came in at $15.83 billion, up 8.8% from the prior-year period. Its pre-tax profit came in at $9.40 billion for the quarter, indicating no change from the prior-year period. ITOCY’s net profit came in at $7.18 billion, representing a 99.4% rise from the prior-year period. The company had $5 billion in cash and cash equivalents as of March 31, 2022.
Analysts expect ITOCY’s revenue to grow 242.1% year-over-year to $87.03 billion for its fiscal 2023 ending March 31, 2022. It surpassed the consensus revenue estimates in three of the trailing four quarters.
Over the past three years, the company’s revenue, EBITDA, and total assets have increased at CAGRs of 2%, 25.4%, and 6.4%, respectively. The stock’s 8.99x forward EV/EBITDA is 11.5% lower than the 10.16x industry average. In terms of forward Price/Sales, ITOCY is currently trading at 0.48x, 60.8% lower than the 1.22x industry average. The stock has lost 10% over the past month to close the last trading session at $56.74.
ITOCY’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Stability and a B grade for Growth, Value, and Momentum. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for ITOCY’s Sentiment and Quality here. ITOCY is ranked #3 of 37 stocks in the A-rated Industrial - Manufacturing industry.
Steel Dynamics, Inc. (STLD)
STLD is a diversified domestic steel producer and metals recycler. The company operates through three segments — Steel; Metals Recycling; and Steel Fabrication Operations. It also exports products that include primarily flat-rolled steel sheets, engineered bar special-bar-quality, and structural beams.
As part of its North American raw material procurement strategy, STLD announced its planned acquisition of ROCA ACERO S.A. de C.V. (ROCA), a Mexico-based ferrous and nonferrous scrap metals recycling business operator, on May 16, 2022. ROCA’s four scrap processing facilities currently ship approximately 575,000 gross tons of scrap annually and have an estimated annual processing capacity of approximately 850,000 gross tons. This acquisition will help STLD further solidify its Southwest U.S. and Mexico growth strategy.
For its fiscal 2022 first quarter ended March 31, 2022, STLD’s net sales increased 57.1% year-over-year to $5.57 billion. The company’s gross profit came in at $1.76 billion, up 122.7% from the prior-year period. Its operating income came in at $1.50 billion for the quarter, representing a 151.6% increase from the prior-year period. While its net income increased 156.4% year-over-year to $1.10 billion, its EPS grew 181.3% to $5.71. As of March 31, 2022, the company had $1.19 billion in cash and equivalents.
The consensus EPS estimate of $19.29 for fiscal 2022 ending December 31, 2022, represents a 19.9% rise from the prior-year period. It surpassed Street EPS estimates in three of the trailing four quarters. Analysts expect the company’s revenue to be $22.86 billion for the same quarter, indicating a 24.2% rise from the prior-year period. STLD’s EPS is expected to grow at a 25.7% rate per annum over the next five years.
Over the past three years, the company’s revenue, EBITDA, and total assets have grown at CAGRs of 19.3%, 40.2%, and 18.5%, respectively. STLD’s 2.93x forward EV/EBITDA is 56.5% lower than the 6.74x industry average. In terms of forward Price/Cash Flow, STLD is currently trading at 3.62x, 47.5% lower than the 6.89x industry average. It has gained 20.3% over the past six months but lost 17% over the past month to close the last trading session at $75.91.
STLD’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
The stock has a B grade for Quality, Growth, Momentum, and Value. Click here to see the additional ratings for STLD (Sentiment and Stability). The stock is ranked #12 of 33 stocks in the A-rated Steel industry.
Teck Resources Limited (TECK)
Headquartered in Vancouver, Canada, TECK engages in exploring for, acquiring, developing, and producing natural resources through its Steelmaking Coal; Copper; Zinc; Energy; and Corporate segments internationally. The company also produces indium, germanium, gold, blended bitumen, lead, silver, molybdenum, chemicals, fertilizers, and other metals.
On May 3, 2022, TECK and Vancouver International Airport (YVR) announced a partnership through YVR’s Innovation Hub and TECK’s Copper & Health program to install antimicrobial copper on high-touch surfaces to continuously kill bacteria and reduce the spread of infection. Nearly 1,000 antimicrobial copper applications have already been installed on baggage carts, water fountains, washrooms throughout the terminal, and YVR’s offices so far. This should help TECK to gain wider market reach in the coming months.
For its fiscal 2022 first quarter ended March 31, 2022, TECK’s revenues increased 97.6% year-over-year to CAD$5.03 billion ($25.17 billion). The company’s gross profit came in at CAD$2.57 billion ($2.01 billion), representing a 292.7% year-over-year improvement. Its pre-tax income came in at CAD$2.45 billion ($1.92 billion) for the quarter, up 389% from the year-ago period. TECK’s adjusted net income came in at CAD$1.62 billion ($1.27 billion), indicating a 396.9% rise from the year-ago period. Its adjusted EPS increased 385.3% year-over-year to CAD$2.96. As of March 31, 2022, the company had CAD$2.47 billion ($1.93 billion) in cash and cash equivalents.
Analysts expect TECK’s EPS to grow 89.4% year-over-year to $8.43 for its fiscal 2022 ending December 31, 2022. It surpassed the consensus EPS estimates in three of the trailing four quarters. The consensus revenue estimate of $15.29 billion for the same fiscal year indicates a 44.3% year-over-year improvement. The company’s EPS is expected to grow at a 54.8% rate per annum over the next five years.
Over the past three years, the company’s revenue, EBITDA, and total assets have grown at CAGRs of 8.3%, 16.2%, and 5.1%, respectively. TECK’s 3.17x forward EV/EBITDA is 52.9% lower than the 6.74x industry average. In terms of forward Price/Cash Flow, TECK is currently trading at 3.47x, 49.7% lower than the 6.89x industry average. The stock has gained 55.8% over the past six months but lost 7.3% over the past month to close the last trading session at $40.29.
TECK’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for TECK’s Stability, Sentiment, and Momentum here. TECK is ranked #5 of 37 stocks in the Industrial - Metals industry.
NTR shares were trading at $101.28 per share on Monday afternoon, up $4.26 (+4.39%). Year-to-date, NTR has gained 35.32%, versus a -16.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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