For Immediate Release
Chicago, IL – September 9, 2022 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Taiwan Semiconductor Manufacturing Company Ltd. TSM, Haynes International, Inc. HAYN, United Rentals, Inc. URI and InterContinental Hotels Group plc IHG.
Here are highlights from Thursday’s Analyst Blog:
Use the Pullback to Invest in Stocks with Long-Term Potential
The simplest way to make money in the stock market is by buying cheap and selling when prices rise. But because it is so hard to guess a bottom, or a height for that matter, people make mistakes. And it's true that we all make mistakes, from the most experienced of us to the novices.
One of the big mistakes we can make is to fret at the bloodbath in the market today. Everything that experts and market watchers are saying point to the increased likelihood of a successful soft landing. We have commodity prices receding, we have inventory building up in certain areas that are bringing down prices, we have the housing market softening with enough demand in the backdrop to ensure that there won't be a crash, and most importantly, we have a relatively strong consumer.
The tightening in the jobs market is easing somewhat and we are continually adding more jobs. Even if the Fed continues to warn us, this is a positive scenario. It just doesn't look like we are moving into a protracted period of weakness. Even if we do slip into a recession next year, it is likely to be short-lived.
So, getting back to the market, if prices are going down, that's a good thing. It is becoming a buyers' market. Although the market appears to be pricing in all the impending negativity (and then some), it could go down some more. That is always a possibility. But since it is practically impossible to guess a bottom, we can still buy some good stocks based on their outlook, the outlook for the industry to which they belong and analyst optimism on their long-term potential. That's the theory behind these picks:
Taiwan Semiconductor Manufacturing Company Ltd.
Taiwan Semiconductor manufactures, packages, tests and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan and the U.S. It provides complementary metal oxide silicon wafer fabrication processes to manufacture logic, mixed-signal, radio frequency and embedded memory semiconductors.
The Zacks Rank #1 stock is part of the Semiconductor - Circuit Foundry industry, which is in the top 1% of Zacks-classified industries. Our research shows that historically, the top 50% of Zacks-classified industries outperform the bottom 50% by a factor of 2 to 1. And that's not all. When a stock with a #1 rank belongs to such an industry, it has a very good chance of appreciation in the near term. So these two factors alone make the shares attractive. But if you're not convinced, we can also look at the numbers.
Analysts are currently quite upbeat about Taiwan Semiconductor. Their revenue and earnings estimates for the year represent growth of 36.9% and 52.9%, respectively. Moreover, growth is expected to continue the following year with revenue up another 14.4% while earnings increase another 3.5%. For the long term, they're looking for 24.2% earnings growth.
The price decline of 6.1% doesn't seem to make sense given the above. And valued on the basis of price to earnings (P/E), the shares are trading at a 12.4X multiple, close to the lowest point of 12.38X over the past year. Therefore, it makes sense to accumulate the shares.
Haynes International, Inc.
Haynes International, Inc. develops, manufactures, markets and distributes nickel and cobalt-based alloys in sheet, coil and plate forms in the U.S., Europe and Asia.
The shares carry a Zacks Rank #1 and belong to the Steel – Speciality industry, which is in the top 1% of Zacks-classified industries.
Analysts currently expect its 2022 (ending September) revenue to grow 44.1% and its 2023 revenue to grow 13.8%. They expect its earnings to grow a respective 602.8% and 20.0%. They've taken their 2022 estimate up 32.2% and 2023 estimate up 12.6% in the last 60 days. The long-term growth is pegged at 20.0%.
Given all these positives, the 7.1% decline in prices over the last 4 weeks could be seen as a buying opportunity. Particularly because the valuation multiple of 9.2X earnings is really low, and close to its lowest point over the past year.
United Rentals, Inc.
United Rentals offers various kinds of industrial equipment on rent to construction and industrial companies involved in infrastructure and other projects, manufacturers, utilities, municipalities, homeowners and government entities. It two operating segments are General Rentals and Specialty.
United Rentals shares carry a Zacks Rank #1 and belong to the attractive Building Products – Miscellaneous industry (top 26%). This combination is indicative of share price appreciation.
The numbers also look good. With revenue growth expected to be 19.2% and 7.6% in 2022 and 2023, respectively and earnings growth expected to be 43.8% and 10.8%, United Rentals shares should have been on an upward trajectory. Especially since recent estimate revisions point to an improving trend: the Zacks Consensus Estimate for 2022 is up 6.9% while that for 2023 is up 4.7% in the last 60 days.
Yet despite the positive trend and a long-term growth estimate of 17.6%, the shares traded down 8.7% in the last 4 weeks. They currently trade at 8.7X earnings, which is close to their lowest point over the past year. This definitely looks like an opportunity to buy.
InterContinental Hotels Group plc
InterContinental Hotels Group plc owns, manages, franchises and leases hotels in the Americas, Europe, Asia, the Middle East, Africa and Greater China. As of Dec 31, 2021, InterContinental operated 5,991 hotels and 880,327 rooms in approximately 100 countries under the Six Senses, Regent, InterContinental Hotels & Resorts, Vignette Collection, Kimpton Hotels & Restaurants, Hotel Indigo, EVEN Hotels, HUALUXE, Holiday Inn, Holiday Inn Express, Holiday Inn Club Vacations, avid, Staybridge Suites, Atwell Suites, Candlewood Suites, voco and Crowne Plaza brands.
The Zacks Rank #1 stock belongs in the Hotels and Motels industry (top 37%).
InterContinental is expected to grow its revenue 21.7% in 2022 followed by another 16.6% in 2023. Earnings are also expected to grow in both years, by a respective 88.4% and 23.8%. Its 2022 estimate has increased 9.1% in the last 30 days while the 2023 estimate increased 5.5%.
Despite these positives, and analyst expectations for 16.9% earnings growth over the long term, the company's shares have dropped 10.0% in the last 4 weeks. The 17.0X earnings multiple is relatively close to the S&P 500's 16.9X and also their lowest level of 16.6X over the past year. So, this too could be considered a buying opportunity.
The market appears to be pricing in the expected slowdown in the economy, so it's relatively easy to find good undervalued stocks right now. Given the high level of volatility, we cannot rule out the possibility of further downside in the immediate future. But the possibility of greater upside thereafter looks stronger.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Intercontinental Hotels Group (IHG) : Free Stock Analysis Report
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