With recent economic indicators showing signs of a potential slowdown, investors should focus on their long-term strategies. Fundamentally robust stocks, Serco Group plc (SCGPY), MasterCraft Boat Holdings, Inc. (MCFT), and PCTEL, Inc. (PCTI), which witnessed steady growth in the last reported quarter and are trading at a discount, could be worth adding to your portfolios.
According to the Labor Department, payrolls grew by 236,000 in March, compared to the Dow Jones estimate of 238,000 and below the upwardly revised 326,000 in February. Moreover, the unemployment rate ticked lower to 3.5%, the lowest monthly gain since December 2020.
To add to that, payroll processing firm ADP reported recently that private sector hiring decelerated in March, flashing another potential sign that U.S. economic growth is heading for a sharp slowdown or recession.
Furthermore, according to estimates from Bloomberg, March’s Consumer Price Index (CPI) is expected to come in at 5.2%, a slowdown from February’s 6% annual gain. On a monthly basis, consumer prices are expected to have risen 0.2% in March, down from a 0.4% increase in February.
Moreover, forecasts from the central bank released last month suggested one additional rate increase was likely this year. According to data from the CME Group, markets were pricing in a 70% chance the Federal Reserve would raise rates by another 0.25% in May.
Take a look at the stocks mentioned above:
Serco Group plc (SCGPY)
Based in Hook, the United Kingdom, SCGPY provides public services in the United Kingdom, Europe, North America, the Asia Pacific, and the Middle East.
SCGPY’s forward P/S multiple of 0.38 is 68.9% lower than the 1.23 industry average. Its 0.53x forward EV/Sales is 65.8% lower than the 1.55x industry average. The stock’s forward EV/EBITDA of 6.58x is 35.8% lower than the industry average of 10.25x.
On February 23, 2023, SCGPY announced that it had been awarded a contract by the US Department of Health and Human Services, Centers for Medicare & Medicaid Services (CMS) to continue to support eligibility determinations for citizens purchasing health insurance through the Federal Health Insurance Exchanges.
The four-year and seven-month contract has a one-year base period and four option periods and is due to start on 1 July 2023. The estimated total value to SCGPY, subject to workload volumes, is approximately $690 million if all option periods are exercised.
SCGPY pays an annual dividend of $0.03, which translates to a yield of 1.65% at the current price. It has a four-year average dividend yield of 0.62%.
SCGPY’s revenue increased 2.5% year-over-year to £4.53 billion ($5.62 billion) during the fiscal year 2022. Its reported operating profit grew marginally from the prior year to £217.20 million ($269.23 million). Also, the company’s underlying EPS increased 10.8% year-over-year to 13.92 pence.
Analysts expect SCGPY’s revenue for the fiscal year 2023 to rise 1.5% year-over-year to $1.86 billion.
The stock has gained 17.8% over the past six months to close the last trading session at $1.86. It has a 24-month beta of 0.48.
SCGPY’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
SCGPY also has an A grade in Value and Stability and a B in Growth and Quality. It is ranked #2 out of 80 stocks in the Technology - Services industry.
For additional ratings for SCGPY’s Sentiment and Momentum, click here.
MasterCraft Boat Holdings, Inc. (MCFT)
MCFT designs, manufactures, and markets recreational powerboats. The company operates through four segments: MasterCraft; Crest; NauticStar; and Aviara.
MCFT’s forward non-GAAP P/E multiple of 6.11 is 55.4% lower than the 13.70 industry average. Its 0.73x forward EV/Sales is 32% lower than the 1.08x industry average. The stock’s forward EV/EBIT of 4.51x is 64.7% lower than the industry average of 12.80x.
On November 2, 2022, MCFT announced an expansion of its popular entry-level NXT lineup with the all-new 2023 NXT21 and NXT23. The new models deliver best-in-class wave performance, added storage, spacious hybrid bow design, and standard telematics.
The two new entry-level boats are durable and easy to use, providing a great on-water experience for boaters at a reasonable price. This move is expected to attract more customers to the company.
MCFT’s net sales increased 10.2% year-over-year to $159.19 million in the fiscal 2023 second quarter that ended January 1, 2023. The company’s adjusted EBITDA grew 9.8% year-over-year to $29.82 million. Its adjusted net income rose 11% from the prior-year quarter to $21.27 million, while adjusted EPS increased 18.8% year-over-year to $1.20.
Street expects MCFT’s EPS and revenue to amount to $1.04 and $158.14 million in the fiscal third quarter that ended March 2023. Moreover, the company has surpassed the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
The stock has gained 39.8% over the past six months to close the last trading session at $28.27.
It’s no surprise that MCFT has an overall rating of A, equating to a Strong Buy in our POWR Ratings system.
The stock has a B grade for Value, Sentiment, and Quality. MCFT is ranked #2 out of 37 stocks in the Athletics & Recreation industry.
In addition to the POWR Ratings highlighted above, one can access MCFT’s grade for Growth, Momentum, and Stability here.
PCTEL, Inc. (PCTI)
PCTI, together with its subsidiaries, provides industrial Internet of Thing (IoT) devices, antenna systems, and test and measurement solutions worldwide.
PCTI’s forward non-GAAP P/E of 11.13x is 45.3% lower than the industry average of 20.35x. Its forward EV/Sales of 0.53x is 80.7% lower than the industry average of 2.73x. Its forward Price/Sales multiple of 0.79 is 70.5% lower than the industry average of 2.67.
PCTI pays $0.22 annually as dividends. This translates to a yield of 5.20% at the current market price, compared to the 4-year average dividend yield of 3.90%.
PCTI’s gross profit increased 9.2% year-over-year to $13.04 million in the fiscal fourth quarter, which ended December 31, 2022. Its non-GAAP operating income increased 37.2% year-over-year to $3.16 million. Also, its non-GAAP net income increased 43.9% year-over-year to $3 million, while its net income per common share increased 33.3% year-over-year to $0.16.
PCTI’s EPS is expected to rise 150% year-over-year to $0.05 in the fiscal first quarter that ended March 2023. Moreover, it has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 1.6% year-to-date to close the last trading session at $4.37. Its 24-month beta is 0.50.
PCTI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
PCTI also has an A grade for Value and Sentiment and a B in Growth, Momentum, and Quality. It is ranked first among 48 stocks in the B-rated Technology-Communication/Networking industry.
Click here to access additional ratings for PCTI’s Stability.
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SCGPY shares were unchanged in premarket trading Tuesday. Year-to-date, SCGPY has declined -5.58%, versus a 7.52% 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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