The stock market has been under pressure due to heightened inflation, the Fed’s policy moves, and the Russia-Ukraine war. However, robust earnings reports should be a significant tailwind for the market. According to data from Refinitiv, the estimated earnings growth rate for the S&P 500 for the fourth quarter of 2021 is 31.5%, with 10 of the 11 sectors in the index expected to see an improvement in earnings compared to the prior-year quarter. Furthermore, of the 472 companies in the S&P 500 that have reported earnings to date for the quarter, as of February 25, 76.9% have surpassed analysts’ earnings estimates.
Job growth accelerated in February, marking the biggest monthly gain since July as employment edges closer to pre-pandemic levels. Nonfarm payrolls for the month grew by 678,000, and the unemployment rate was 3.8%, compared to the estimated 440,000 and 3.9%, respectively, while wages were flat. “The details are bullish for stocks in that job creation remains robust, and the participation rate is moving higher while wages came in soft, potentially taking some pressure off the Fed,” said Adam Crisafulli of Vital Knowledge.
Given this backdrop, we believe investors should consider buying fundamentally sound stocks priced at less than $10 Huttig Building Products, Inc. (HBP), Medallion Financial Corp. (MFIN), and Ampco-Pittsburgh Corporation (AP).
Huttig Building Products, Inc. (HBP)
HBP is a St. Louis, Miss.-based domestic distributor of millwork, building materials, and wood products used principally in new residential construction, home improvement, remodeling, and repair work. HBP serves dealers in 41 states through 25 distribution centers covering a substantial portion of the U.S. housing market.
For its fiscal fourth quarter, ended Dec. 31, 2021, HBP’s net sales increased 24.8% year-over-year to $230.40 million, while its operating income increased 910% year-over-year to $10.10 million. Its net income stood at $6.80 million, up 2,166.7% from its year-ago value. The company’s EPS increased 2,400% year-over-year to $0.25.
The stock has gained 179.4% in price over the past year and 58.3% over the past six months to close yesterday’s trading session at $9.78.
It’s no surprise HBP has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HBP also has an A grade for Growth and Value and a B grade for Momentum and Quality. Among the 54 stocks in the B-rated Industrial - Building Materials industry, it is ranked #1. Click here to view additional ratings for Sentiment and Stability.
Medallion Financial Corp. (MFIN)
MFIN in New York City operates as a finance company in the United States. It originates, acquires, and services loans that finance taxi medallions and various types of commercial businesses.
MFIN’s net interest income increased 25.1% year-over-year to $35.59 million in its fiscal fourth quarter, ended December 31, while its net interest margin was 9.38%, up from 8.89% in the prior-year quarter. Also, its loan originations increased 91.1% year-over-year to $192.6 million. Its net income came in at $19.47 million, indicating an increase of 201.1% from its year-ago value, and its EPS increased 200% year-over-year to $0.78.
Analysts expect MFIN’s revenues to increase 20.2% year-over-year to $36.11 million in the current quarter, ending March 31, 2022. The company’s EPS is expected to increase 2.9% from the same period last year to $0.35. In addition, MFIN surpassed the Street’s EPS estimates in each of the trailing four quarters.
Shares of MFIN have gained 25.5% in price over the past year and 51% year-to-date to close yesterday’s trading session at $8.76.
MFIN’s sound fundamentals are reflected in its POWR Ratings. MFIN has an overall B rating, which equates to Buy in our POWR Ratings system. It also has a B grade for Value and Sentiment. Among the 112 stocks in the Financial Services (Enterprise) industry, MFIN is ranked #9. To see additional MFIN ratings for Stability, Growth, Quality, and Momentum, click here.
Ampco-Pittsburgh Corporation (AP)
AP manufactures and sells specialty metal products and customized equipment to commercial and industrial users worldwide. It operates in two segments, Forged and Cast Engineered Products; and Air and Liquid Processing. AP is headquartered in Carnegie, Pa.
Ap’s net sales increased 7.3% year-over-year to $81.19 million in its fiscal third quarter, ended September 30. The increase was attributable primarily to higher sales of forged engineered products to the steel distribution and energy markets, and higher sales of cast rolls for hot strip mills.
The Street expects the company’s revenues to come in at $344.70 million in its fiscal year ended December 2021, indicating an increase of 4.9% year-over-year.
Over the past six months, AP shares have gained 36.9% in price to close yesterday’s trading session at $6.34. The stock has gained 26.8% year-to-date.
AP has an overall B rating, translating to Buy in our POWR Ratings system. AP also has a B grade for Value, Momentum, and Quality. It is ranked #40 out of the 85 stocks in the A-rated Industrial - Machinery industry.
In addition to the POWR Ratings grades highlighted, one can see the AP’s Growth, Stability, and Sentiment ratings here.
Note that HBP and AP are two of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
What To Do Next?
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HBP shares were trading at $9.44 per share on Friday afternoon, down $0.34 (-3.48%). Year-to-date, HBP has declined -14.72%, versus a -9.57% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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