Investors have turned away from growth stocks toward value stocks due to rising interest rates and stubbornly high inflation. Moreover, stronger-than-expected U.S. jobs figures and gross domestic product data underscore a risky move for the Federal Reserve to take its foot off the monetary brake.
Given the continued strain on the economy, it could be beneficial to power your portfolio with fundamentally sound value stocks such as Continental Aktiengesellschaft (CTTAY), Commvault Systems, Inc. (CVLT), Commercial Vehicle Group, Inc. (CVGI), and CPI Aerostructures, Inc. (CVU).
The Commerce Department recently reported that the core personal consumption expenditures price index rose 0.4% in April and 4.7% from a year ago, indicating that inflation remains sticky. Despite the high inflation rate, consumer spending increased by 0.8% for the month, as personal income increased by 0.4%.
Although the CPI has cooled significantly from its peak above 9% in June last year, falling to 4.9% in April, it remains well above the Fed’s 2% target. These figures have taken the policymakers off guard, bolstering the case for further tightening at its next meeting.
As a result, the market is pricing another quarter-percentage-point interest rate hike at the June meeting, bringing the federal funds rate to 5.25% - 5.5%.
Amid the ongoing market uncertainty, value stocks seem to be a wise investment option, as they tend to represent matured businesses that offer investors an opportunity to reap outsized gains. Hence, investing in CTTAY, CVLT, CVGI, and CVU could be wise.
Continental Aktiengesellschaft (CTTAY)
Headquartered in Hanover, Germany, CTTAY is a technology company that offers mobility solutions to the automotive sector globally. It operates through four sectors: Automotive; Tires; ContiTech; and Contract Manufacturing.
On April 27, CTTAY partnered with Aurora Innovation, Inc. to make the Aurora Driver, Aurora’s flagship integrated hardware and software system, commercially scalable. The system is expected to be available for carriers and commercial fleet operators across the U.S. and to help reduce costs to facilitate broader adoption.
CTTAY’s CEO Nikolai Setzer said, “Continental demonstrates its leading technology expertise by industrializing the first commercially scalable autonomous trucking systems. Together with Aurora, we take a crucial step towards autonomous mobility.”
In terms of forward EV/Sales, CTTAY is trading at 0.46x, 57.5% lower than the industry average of 1.07x. Its forward EV/EBITDA multiple of 3.99 is 56.9% lower than the industry average of 9.24x. In addition, CTTAY’s forward Price/Sales ratio of 0.31 is 61.3% lower than the industry average of 0.80.
CTTAY’s sales increased 11.1% year-over-year to €10.31 billion ($11.05 billion) in the first quarter that ended March 31, 2023. Its adjusted EBIT grew 35% from the year-ago value to €578.30 million ($619.83 million), while its net income increased 58.1% year-over-year to €392.60 million ($420.79 million). The company’s EPS rose 59.2% from its year-ago value to €1.91.
Street expects CTTAY’s revenue to increase 17% year-over-year to $11.28 billion in the current quarter (ending June 30, 2023). For the fiscal year 2023, its revenue is expected to increase 9.5% year-over-year to reach $45.51 billion, while its EPS estimate of $0.76 indicates significant year-over-year growth. Moreover, it topped the revenue estimates in each of the trailing four quarters.
Over the past three years, CTTAY’s tang book value has grown at a 4.4% CAGR.
The stock has gained 30.4% over the past nine months to close the last trading session at $7.17.
CTTAY’s solid prospects are reflected in its POWR Ratings. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Value, Stability, and Quality. Among the 58 stocks in the A-rated Auto Parts industry, CTTAY is ranked seven. Click here to see the other ratings of CTTAY for Momentum and Sentiment.
Commvault Systems, Inc. (CVLT)
CVLT provides data protection and information management software applications and services to large enterprises, small and medium-sized businesses, and government agencies globally. Its offerings include Commvault Backup and Recovery, Commvault Disaster Recovery, Commvault Complete Data Protection, and Metallic Data Protection as-a-service.
On May 3, CVLT announced that KuppingerCole Analysts AG had named the company as an Overall Leader in its Leadership Compass on Cloud Backup for Ransomware Protection. Within this rating, the company had also been recognized as a Product Leader, Innovation Leader, and Market Leader for Metallic DPaaS.
Thanks to its extensive coverage for SaaS apps and structured and unstructured data, CVLT remains at the forefront of cloud data protection.
On April 11, CVLT collaborated with Microsoft to aid organizations in driving hard cost savings and improving operational efficiencies. According to an Enterprise Strategy Group (ESG) report, the collaboration should enable organizations to reduce data protection and management costs by up to 30%. The collaboration could be strategically beneficial for the company.
In terms of forward EV/EBIT and Price/Cash Flow, CVLT is trading at 16.30x and 17.72x, which is 8.9% and 10.1% lower than the industry averages of 17.89x and 19.71x, respectively.
CVLT’s total revenues increased marginally year-over-year to $784.59 million for the fiscal year that ended on March 31, 2023. Its Non-GAAP income from operations and net income amounted to $159.90 million and $117.11 million, respectively. The company’s non-GAAP EPS stood at $2.56, up 2% from the prior-year period. In addition, its cash and cash equivalent came in at $287.78 million, representing an increase of 7.6% year-over-year.
Streets expect CVLT’s EPS and revenue to increase 10.8% and 3.7% year-over-year for the second quarter (ending September 2023) to $0.63 and $195.02 million, respectively. Moreover, it topped its EPS and revenue estimates in three of the trailing four quarters, which is promising.
CVLT’s revenue and EBITDA have increased at CAGRs of 5.4% and 54.7%, respectively, over the past three years, while its levered free cash flow has grown at an 8.9% CAGR.
Over the past nine months, the stock has gained 25.1% to close the last trading session at $69.48.
CVLT’s POWR Ratings reflect this solid outlook. The stock has an overall A rating, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Quality and a B for Growth, Value, and Sentiment. In the 133-stock Software – Application industry, it is ranked #3. To see additional POWR Ratings of CVLT for Momentum and Stability, click here.
Commercial Vehicle Group, Inc. (CVGI)
CVGI manufactures, produces, and sells components and assemblies through its four operating segments: Vehicle Solutions; Electrical Systems; Aftermarket & Accessories; and Industrial Automation. Its offerings include robotic assemblies, electric vehicle assemblies, electrical wire harnesses, seating systems, mechanical assemblies, structures, plastic products, and more.
On April 6, the company announced the expansion of its global footprint, capacity, and capabilities with two new facilities in Morocco and Mexico, which are expected to be operational by the third quarter of 2023. Amid a rapidly growing electrification landscape, these plants should help CVGI meet the customer’s demand.
Harold Bevis, President and CEO of CVGI, commented, "Through strategic green-field projects like these, CVGI intends to remain at the forefront of the electrification industry and provide outstanding quality and customer service for both current and new customers."
In terms of forward EV/Sales, CVGI is trading at 0.46x, 71.3% lower than the industry average of 1.60x. The stock’s forward Price/Sales of 0.31x is 75.5% lower than the 1.27x industry average. Furthermore, the stock’s forward EV/EBITDA of 6.51x is 37.4% lower than the 10.41x industry average.
For the fiscal first quarter that ended March 31, 2023, CVGI’s revenues increased 7.5% year-over-year to $262.71 million, while its gross profit grew 38.7% from the prior-year quarter to $35.21 million. The company’s adjusted operating and net incomes improved 62.5% and 74.6% from the year-ago values to $15.36 million and $9.23 million, respectively.
CVGI’s adjusted EPS stood at $0.28, up 75% year-over-year. Additionally, adjusted EBITDA came in at $19.82 million, representing a 46.6% increase from the same period last year.
Analysts expect CVGI’s EPS to increase 89.8% year-over-year to $0.25 for the fiscal second quarter (ending June 30, 2023), while its revenue estimate of $261.07 million for the same quarter indicates a 4.1% growth from the prior-year period. Additionally, the stock surpassed consensus revenue estimates in three out of the trailing four quarters.
Over the past three years, CVGI’s revenue and total assets have grown at 5.8% and 4.9% CAGRs, respectively. Moreover, its levered FCF has grown at 12.8% CAGR over the same period.
ITRN’s shares have gained 59.9% over the past six months to close the last trading session at $10.35.
It is no surprise that CVGI has an overall rating of A, equating to a Strong Buy in our proprietary rating system. Out of 58 stocks in the Auto Parts industry, it is ranked #8. It has an A grade for Growth and Sentiment and a B for Value.
Beyond what we stated above, we have also given CVGI grades for Momentum, Stability, and Quality. Get all CVGI ratings here.
CPI Aerostructures, Inc. (CVU)
CVU is a manufacturer of structural assemblies for fixed-wing aircraft, helicopters, and airborne Intelligence Surveillance and Reconnaissance and Electronic Warfare pod systems, primarily for national security markets.
On May 2, CVU received multiple purchase orders of $7.1 million under a previously announced contract from the U.S. Air Force to provide structural modification kits, program management, logistics, and other sustainment services in support of Phase 3 of the T-38C PCIII and TRIM programs.
The new purchase order brings the total funded value of the contract to $38.7 million and extends the currently funded performance period into 2027.
Additionally, on April 19, the company announced that it had received a $3.6 million follow-on order for complex welded structural assemblies used on a U.S. military helicopter, whose deliveries are expected to occur through mid-2024.
Such contracts reflect customers' continued confidence in CVU’s ability to consistently perform and deliver on assembly operations while effectively managing its supply chain.
In terms of trailing-12-month EV/Sales, CVU is trading at 0.86x, 47.1% lower than the industry average of 1.63x. Likewise, its trailing-12-month EV/EBIT and Price/Sales multiples of 11.50 and 0.57 are 26.5% and 55.9% lower than the industry averages of 15.65x of 1.29x.
During the first quarter that ended March 31, 2023, CVU’s revenue increased 9.3% year-over-year to $22.02 million, while its gross profit improved 35.7% from the prior-year quarter to $4.66 million. The company’s net income amounted to $983.31 thousand, compared to a net loss of $32.93 thousand, while its net income per share stood at $0.08 in the same period.
CVU’s EPS is expected to increase by 9% per annum over the next five years. Its revenue has grown at a 2.3% CAGR over the past five years, while its total assets have grown at a 13.8% CAGR over the past three years.
Over the past year, the stock has gained 66.9% to close the last trading session at $3.89.
CVU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. It also has an A grade for Growth and Value and a B for Sentiment and Quality. Out of 71 stocks in the Air/Defense Services industry, it is ranked first.
In addition to the POWR Ratings given above, click here to see CVU’s ratings for Momentum and Stability.
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CTTAY shares were trading at $7.11 per share on Tuesday morning, down $0.06 (-0.84%). Year-to-date, CTTAY has gained 21.06%, versus a 10.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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