Despite the high inflation, consumer spending shot up 1.8% last month, the largest increase since March 2021. As consumers remain resilient, Unilever PLC (UL), Ennis, Inc. (EBF), and Mannatech, Incorporated (MTEX) could be worth adding to your portfolios. Also, these stocks pay regular dividends.
However, recessionary fears persist and might weigh on weak consumer stock Peloton Interactive, Inc. (PTON). Thus, it could be best sold short.
Robust consumer spending adds to fears that the Federal Reserve could continue raising interest rates. The report followed the job data, which indicated a still-tight labor market with the lowest unemployment rate in more than 53 years. In addition, the Commerce Department reported that retail sales in January increased by 3% in January, more than the expectations for a rise of 1.9%.
According to estimates released by the Bureau of Economic Analysis, the personal Consumption Expenditures index increased by 0.6% in January from the prior month, and Disposable Personal Income (DPI) increased by 2% from the previous month to $387.4 billion. The rising personal income of US consumers should benefit the consumer goods industry.
Let’s look at the detailed discussion for the stocks mentioned above:
Stocks to Buy:
Unilever PLC (UL)
UL, headquartered in London, is a fast-moving consumer goods company. It operates through the broad segments of Beauty & Personal Care; Foods & Refreshment; and Home Care.
On February 14, UL announced the sale of its Suave brand in North America to Yellow Wood Partners LLC.
Esi Eggleston Bracey, President of Unilever USA and CEO of UL North America, said, “This is another step on our path to shift our portfolio towards strategic growth spaces.”
UL’s forward EV/EBIT of 15.18x is 1.5% lower than the industry average of 15.41x. Its forward non-GAAP P/E multiple of 18.59 is 4.2% lower than the industry average of 19.41.
On February 9, UL declared a quarterly dividend of $0.46, payable on March 21, 2023. UL pays a $1.83 per share dividend annually, which translates to a 3.60% yield on the current price. Its dividend payments have grown at a CAGR of 1.2% over the past five years. The company has a four-year average dividend yield of 3.47%. Also, it has paid dividends for 12 consecutive years.
UL’s turnover rose 14.5% year-over-year to €60.07 billion ($63.70 billion) in the fiscal year that ended December 31, 2022. The company’s net profit increased 24.9% year-over-year to €8.27 billion ($8.77 billion). Also, its earnings per share came in at €2.99, up 28.9% from the prior year.
Analysts expect UL’s revenue to rise 3.7% year-over-year to $15.02 billion in the current fiscal quarter ending March. Additionally, it has topped consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 14.1% over the past nine months to close its last trading session at $50.70. It has a 24-month beta of 0.13.
UL’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
UL also has a B grade for Value and Stability. It is ranked #3 of 57 stocks in the Consumer Goods industry.
Beyond what is stated above, we’ve also rated UL for Growth, Quality, Sentiment, and Momentum. Get all UL ratings here.
Ennis, Inc. (EBF)
EBF designs, manufactures, and sells business forms and other business products. The company offers snap sets, continuous forms, laser cut sheets, tags, labels, envelopes, integrated products, jumbo rolls, and pressure-sensitive products. It distributes business products and forms through independent distributors.
In November 2022, EBF announced its acquisition of School Photo Marketing in Morganville, New Jersey. School Photo Marketing provides printing, yearbook publishing, and marketing-related services to over 1,400 school and sports photographers servicing schools around the country.
Keith Walters, Chairman, President & CEO of the company, stated, “We are delighted to have the opportunity to bring School Photo Marketing, their employees, and their customers into the EBF family. This addition brings with it many exciting possibilities to service this new channel with products produced through EBF manufacturing operations.”
EBF forward EV/Sales of 1.10x is 37.7% lower than the industry average of 1.76x. Its forward Price/Sales multiple of 1.27 is 9.1% lower than the industry average of 1.39.
The company pays a $1.00 dividend annually, which translates to a yield of 4.73% at the current price level. Its dividend payments have grown at CAGRs of 3.6% and 5.2% over the past three and five years, respectively. The company has a four-year average dividend yield of 4.80%.
EBF’s revenue rose 7.1% year-over-year to $110.25 million in the third quarter that ended November 30, 2022. The company’s non-GAAP EBITDA increased 35.1% year-over-year to $20.80 million. Also, its earnings per share came in at $0.44, up 51.7% from the prior-year quarter.
Street’s EPS estimate of $0.36 for the fiscal fourth quarter (ending February 2023) reflects a rise of 33.3% year-over-year. Its revenue estimate for the current quarter of $101.85 million indicates an improvement of 2.2% from the prior-year quarter. Additionally, EBF has topped consensus revenue and EPS estimates in three of the trailing four quarters.
The stock has gained 23.2% over the past nine months to close the last trading session at $21.53. Its 24-month beta is 0.48.
EBF’s robust prospect is reflected in its POWR Ratings. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
EBF has an A grade for Quality and B for Growth, Sentiment, and Stability. It is ranked first in the same industry.
Click here to see the additional POWR Ratings for EBF (Value and Momentum).
Mannatech, Incorporated (MTEX)
MTEX operates as a health and wellness company worldwide. It develops, markets, and sells nutritional supplements; topical and skin care, anti-aging products; and weight-management products.
On December 15, 2022, MTEX announced its continued expansion into the ASEAN region, with the official launch into the Thailand market. This opening will bring MTEX’s global presence to 26 markets.
The stock’s trailing-12-month Price/Sales multiple of 0.23 is 80.8% lower than the industry average of 1.19. In terms of the trailing-12-month EV/Sales, MTEX’s multiple of 0.16 is 91% lower than the industry average of 1.77.
While the company has a four-year average dividend yield of 6.68%, MTEX pays a $0.80 per share dividend annually, which translates to a 4.72% yield on the current price. Its dividend payments have grown at a CAGR of 17% and 9.9% over the past three and five years, respectively.
MTEX’s non-GAAP net sales stood at $38.90 million in the third quarter that ended September 30, 2022. The company’s total operating expenses decreased 5.4% year-over-year to $26.74 million. Also, its earnings per share stood at $0.61.
The stock gained 1.7% intraday to close its last trading session at $16.69.
The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
MTEX also has an A grade for Value and Quality and a B for Sentiment. It is ranked #4 in the same industry.
To get MTEX ratings for Growth, Stability, and Momentum, click here.
Stock to Sell:
Peloton Interactive, Inc. (PTON)
PTON operates an interactive fitness platform in North America and internationally. It operates through two segments: Connected Fitness Products and Subscription.
PTON’s forward EV/Sales multiple of 2.25 is 85.6% higher than the industry average of 1.21. Its forward Price/Sales multiple of 1.69 is 78.6% higher than the industry average of 0.95.
PTON’s total revenue declined 30.1% year-over-year to $792.70 million in the second quarter that ended December 31, 2022. Its gross profit declined 16.4% year-over-year to $235 million in the same quarter. The company’s net loss and net loss per share came in at $335.40 million and $0.98, respectively. In addition, its adjusted EBITDA loss came in at $122.40 million.
Analysts expect PTON’s revenue to decline 26.4% year-over-year to $710.03 million in the fiscal third quarter ending March 2023. Its EPS is expected to be negative $0.51 for the same quarter. The company has failed to surpass the consensus revenue estimates in three of the trailing four quarters.
The stock has declined 51.6% over the past year, closing the last trading session at $13.08. The stock has a 24-month beta of 2.05.
PTON’s grim prospects are reflected in its POWR Ratings. The stock has an overall F rating, translating to a Strong Sell in our POWR Rating system.
PTON has an F grade for Stability and Sentiment and a D for Value and Quality. It is ranked #54 in the same industry.
To see the additional POWR Rating for Growth and Momentum for PTON, click here.
What To Do Next?
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What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low-priced companies with the most upside potential in today’s volatile markets.
But even more important is that they are all top Buy rated stocks according to our coveted POWR Ratings system, and they excel in key areas of growth, sentiment and momentum.
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UL shares were trading at $50.23 per share on Friday afternoon, down $0.47 (-0.93%). Year-to-date, UL has gained 0.65%, versus a 3.43% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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