5 Outperforming Stocks Value Investors Should Add to Their Portfolios The benchmark indices again ended in the red in the last trading session. With market volatility expected to remain, value investing is gaining traction. We think fundamentally sound stocks Tyson...
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The benchmark indices again ended in the red in the last trading session. With market volatility expected to remain, value investing is gaining traction. We think fundamentally sound stocks Tyson Foods (TSN), LyondellBasell (LYB), Takeda Pharmaceuticals (TAK), Bayer AG (BAYRY), and AutoNation (AN), which are currently trading at a discount, could be ideal bets for value investors. The stocks have outperformed the broader market this year.
The benchmark indices extended their losses on Thursday, with the S&P 500 inching closer to the bear market. The S&P 500 fell 0.58%, the Dow Jones Industrial Average slumped 0.75%, while the tech-heavy Nasdaq Composite declined 0.26%. Greg Bassuk, CEO at AXS Investments, predicts more volatility for the stock market for the second quarter.
Amid the rapid market sell-off, value stocks seem to be providing shelter to investors. In a value investing strategy, traders generally invest in the shares of companies trading cheap versus expensive groups. Growth investing has dominated for some time on the back of government stimulus. However, the tide seems to be turning. Vanguard expects the U.S. value stocks to deliver an annualized return of 4.1% over the next 10 years compared to 0.1% for the U.S. growth stocks.
Hence, some fundamentally strong stocks trading at a discount, namely Tyson Foods, Inc. (TSN), LyondellBasell Industries N.V. (LYB), Takeda Pharmaceutical Company Limited (TAK), Bayer Aktiengesellschaft (BAYRY), and AutoNation, Inc. (AN) might be solid additions to value investors' portfolios. These stocks have outperformed the S&P 500's 18.2% decline year-to-date.
Tyson Foods, Inc. (TSN)
TSN in Springdale, Ark., is a worldwide food company that operates through the four broad segments of Beef; Pork; Chicken; and Prepared Foods. The company processes live-fed cattle and market hogs and manufactures and sells refrigerated food products.
On February 11, TSN declared a quarterly dividend of $0.46 per share on Class A common stock and $0.414 per share on Class B common stock, payable to shareholders on June 15. This reflects upon the company's ability in paying back its shareholders.
On February 2, TSN announced that it had broken ground on the site of its $355 million bacon production facility. The site is expected to be operational in late 2023 and should help the company meet the increasing retail and food service demand for bacon products.
In terms of its forward P/E, TSN is trading at 8.96x, which is 52.7% lower than the 18.96x industry average. Its 0.72 forward EV/Sales multiple is 58.9% lower than the 1.77 industry average.
For the second fiscal quarter, ended April 2, TSN's sales increased 16.1% year-over-year to $13.12 billion. Its adjusted operating income rose 57.1% from the prior-year quarter to $1.16 billion. Its adjusted net income per share attributable to TSN has improved 70.9% from the same period in the prior year to $2.29.
The $9.09 consensus EPS estimate for its fiscal year 2022 indicates a 9.8% year-over-year increase. The $52.80 billion consensus revenue for the same year reflects a 12.2% improvement from the prior year. Furthermore, TSN has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 5.6% in price over the past year and 3.2% over the past six months to close yesterday's trading session at $84.12. It has declined 3.5% year-to-date.
TSN's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
TSN has an A Value grade and a Sentiment grade of B. In the 87-stock Food Makers industry, it is ranked #12. The industry is rated B. Click here to see the additional POWR Ratings for TSN (Growth, Momentum, Stability, and Quality).
LyondellBasell Industries N.V. (LYB)
LYB is a multinational chemical company. The company operates through the Olefins and Polyolefins Americas; Olefins and Polyolefins Europe, Asia, International; Intermediates and Derivatives; Advanced Polymer Solutions; Refining; and Technology segments.
On April 21, LYB announced its plans to exit the refining business and to cease operations of its Houston refinery no later than December 31, 2023. Ken Lane, interim CEO of LYB said, "While this was a difficult decision, our exit of the refining business advances the company's decarbonization goals, and the site's prime location gives us more options for advancing our future strategic objectives, including circularity."
On February 25, LYB declared a $1.13 per share dividend, which was to be paid to shareholders on March 14. This reflects the company's ability in cash generation.
LYB's forward non-GAAP PEG multiple of 0.27 is 76.5% lower than the 1.15 industry average. In terms of its forward Price/Sales, it is trading at 0.68x, which is 44.3% lower than the 1.23x industry average.
LYB's sales and other operating revenues increased 44.9% year-over-year to $13.16 billion in its fiscal first quarter, ended March 31, 2022. Its net income and EPS came in at $1.32 billion and $4.00, respectively, up 23.4% and 25.8%, from the prior-year period.
Analysts expect LYB's revenue to increase 17% year-over-year to $13.52 billion for the fiscal quarter ending June 2022.
LYB's stock has gained 22% in price over the past six months and 18.2% year-to-date to close yesterday's trading session at $109.03.
It is no surprise that LYB has an overall B rating, which translates to Buy in our POWR Rating system.
LYB has an A grade for Value and a B grade for Sentiment and Quality. It is ranked #28 out of the 89 stocks in the Chemicals industry. The industry is rated A. To see the additional POWR Ratings for Growth, Momentum, and Stability for LYB, click here.
Takeda Pharmaceutical Company Limited (TAK)
TAK researches, develops, manufactures, markets, and out-licenses pharmaceutical products worldwide. The company offers its products for gastroenterology, oncology, neuroscience, and rare diseases. It is headquartered in Tokyo, Japan.
On April 28, Centogene N.V (CNTG), a biodata life-science partner company announced the extension of its partnership with TAK. Under the agreement, CNTG is expected to continue to provide TAK with access to diagnostic testing for global patients.
On April 19, TAK announced that it had received manufacturing and marketing approval from the Japan Ministry of Health, Labour and Welfare (MHLW) for Nuvaxovid Intramuscular Injection (Nuvaxovid), a novel recombinant protein-based COVID-19 vaccine for primary and booster immunization in adults. This might add to the company's revenue stream.
In terms of its forward Price/Book, TAK is trading at 1.01x, which is 62.6% lower than the 2.70x industry average. Its 5.94 forward Price/Cash Flow multiple is 63.5% lower than the16.30 industry average.
For its fiscal year ended March 31, 2022, TAK's revenue increased 11.6% year-over-year to $29.39 billion. Its total comprehensive income for the year came in at $6.79 billion, up 18.2% from the prior year. Its net cash from operating activities rose 11.1% from the prior year to $9.25 billion.
The Street expects its revenue for the fiscal year 2023 (ending March 2023) to improve 375.5% from the prior year to $27.97 billion.
The stock has gained 4.1% in price over the past six months and 7% year-to-date to close yesterday's trading session at $14.58.
This promising prospect is reflected in TAK's POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
TAK has a Value grade of A and a Stability grade of B. It is ranked #25 out of the 166 stocks in the Medical – Pharmaceuticals industry. To see the additional POWR Ratings for Growth, Momentum, Sentiment, and Quality for TAK, click here.
Click here to checkout our Healthcare Sector Report for 2022
Bayer Aktiengesellschaft (BAYRY)
BAYRY, headquartered in Leverkusen, Germany, is a life science company that operates worldwide through the segments of Pharmaceuticals; Consumer Health; and Crop Science. The company offers prescription products, nonprescription over-the-counter medicines, and chemical and biological crop protection products.
On April 25, BAYRY announced that it was pursuing an agreement to provide its West Sacramento Biologics Research & Development (R&D) site and internal discovery and lead optimization platform to Ginkgo Bioworks Holdings, Inc. (DNA). The transaction is also expected to bring Joyn Bio's nitrogen-fixing technologies to BAYRY, closing the joint venture created between Leaps by BAYRY and DNA. The transaction is expected to bolster BAYRY's biological position and enable access to key technologies.
On March 10, it was announced that BAYRY and private equity firm Cinven had agreed to sell BAYRY's Environmental Science Professional business for a purchase price of $2.60 billion. Regarding this agreement, Rodrigo Santos, Member of the Board of Management of BAYRY and President of the Crop Science Division, stated, "This divestment represents a very attractive purchase price and allows us to focus on our core agricultural business and the successful implementation of our Crop Science Division growth strategy."
BAYRY's 8.65 forward non-GAAP P/E multiple is 55.1% lower than the 19.29 industry average. In terms of its forward Price/Sales, it is trading at 1.31x, which is 70% lower than the 4.37x industry average.
For the fiscal first quarter of 2022, BAYRY's net sales increased 18.7% year-over-year to €14.64 billion ($15.42 billion). Its net income improved 57.5% from the prior-year quarter to €3.29 billion ($3.47 billion), while its EPS came in at €3.35, up 57.3% from the same period the prior year.
The Street's EPS for fiscal 2023 of $2.03 indicates a 5.2% year-over-year increase. Likewise, the Street's $53.34 billion revenue estimate for the same year reflects a 3.4% rise from the prior year. In addition, BAYRY has topped the EPS consensus estimates in three out of the trailing four quarters, which is impressive.
Over the past six months, the stock has gained 23.1% in price and 26.9% year-to-date to close yesterday's trading session at $16.82.
BAYRY has an overall A rating, which translates to Strong Buy in our POWR Rating system.
The stock has a Growth and Value grade of A and a Stability grade of B. It is ranked #14 in the Medical – Pharmaceuticals industry. Click here to see the additional POWR Ratings for Momentum, Sentiment, and Quality for BAYRY.
Click here to checkout our Healthcare Sector Report for 2022
AutoNation, Inc. (AN)
AN is an automotive retailer in the United States, operating through–Domestic, Import, and Premium Luxury segments. Its offerings include a range of automotive products and services, like new and used vehicles, parts, and automotive repair and maintenance.
On February 23, AN announced the pricing of $700 million of senior unsecured notes due 2032 at 3.850%. The company intended to use the net proceeds from the offering for general corporate purposes, which might include reducing borrowings, strategic initiatives, acquisitions, and share repurchases.
In terms of its forward non-GAAP PEG, AN is trading at 0.18x, which is 78.6% lower than the 0.84x industry average. Its 0.23 forward Price/Sales multiple is 74.6% lower than the 0.90 industry average.
AN's revenue increased 14.4% year-over-year to $6.75 billion in its fiscal first quarter ended March 31. Its adjusted net income rose 54.9% from the prior-year period to $362.10 million. Its adjusted EPS improved 107.2% from the same period the prior year to $5.78.
The Street expects AN's EPS to increase 25.9% year-over-year to $6.08 for its fiscal quarter ending June 30, 2022. Likewise, the Street's revenue estimate for the same quarter of $7.02 billion reflects a 0.6% improvement year-over-year. In addition, AN has beaten consensus EPS estimates in each of the trailing four quarters.
AN's shares have gained 9.6% in price over the past year and 1% over the past month to close yesterday's trading session at $109.76. It has declined 6.1% year-to-date.
AN has an overall B rating, which equates to Buy in our proprietary rating system. AN has an A grade for Value and a B grade for Growth and Quality. It is ranked #4 out of the 24 stocks in the Auto Dealers & Rentals industry. The industry is rated B.
In addition to the POWR Rating grades we have stated above, one can see AN ratings for Momentum, Stability, and Sentiment here.
What To Do Next?
If you would like to see more top value stocks, then you should check out our free special report:
What makes these stocks great additions to any portfolio?
First, because they are all undervalued companies with exciting upside potential.
But even more important, is that they are all top Buy rated stocks according to our coveted POWR Ratings system. Yes, that same system where top-rated stocks have averaged a +37.99% annual return.
Click below now to see these 7 stellar value stocks with the right stuff to outperform in the coming months.
TSN shares were trading at $84.87 per share on Friday afternoon, up $0.75 (+0.89%). Year-to-date, TSN has declined -2.15%, versus a -19.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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