The Federal Reserve’s aggressive monetary policy tightening to reduce inflationary pressure and continued supply chain constraints have increased the chances of the economy slipping into a recession. The recent sell-offs have lowered the valuations of many quality stocks significantly.
Many analysts expect the inflationary pressure to slightly ease in the near term, bringing some positive sentiment to the market. Therefore, investing in mid-cap stocks, which offer better returns than large-cap stocks and more stability than small-cap stocks, could be a wise decision. Moreover, increased focus on domestic production should benefit mid-cap companies in the upcoming months.
Mid-cap stocks Mitsubishi Chemical Holdings Corporation (MTLHY), Ipsen S.A. (IPSEY), AutoNation, Inc. (AN), and KT Corporation (KT) possess sound fundamentals and are trading at significant discounts to their peers. So, it could be wise to invest in these stocks before they start rebounding.
Mitsubishi Chemical Holdings Corporation (MTLHY)
Headquartered in Tokyo, Japan, MTLHY provides performance products, chemicals, industrial materials and gases, health care products, and other products internationally. It is also involved in the environmental and recycling-related activities, and provides warehousing and semiconductor-related services. It has an $8.11 billion market capitalization.
On June 21, 2022, CANAGLU Tablets 100 mg, manufactured by MTLHY’s Mitsubishi Tanabe Pharma Corporation, was approved by the Ministry of Health, Labour and Welfare in Japan for the treatment of chronic kidney disease (CKD) complicated with type 2 diabetes mellitus.
For its fiscal 2022 full year ended March 31, 2022, MTLHY’s sales revenue increased 22.1% year-over-year to ¥3.98 trillion ($29.20 billion). The company’s gross profit came in at ¥1.12 billion ($8.18 billion), indicating a 20.4% rise from the year-ago period. Its operating income came in at ¥303.19 billion ($2.23 billion), up 538.1% from the year-ago period.
MTLHY’s net income came in at ¥209.41 billion ($1.54 billion), representing an 8.2% year-over-year improvement. Its EPS came in at ¥115.03, compared to a loss of ¥5.32 in the prior-year period. As of March 31, 2022, the company had ¥245.79 billion ($1.81 billion) in cash and cash equivalents.
The stock’s 0.74x forward EV/Sales is 47% lower than the 1.39x industry average. In terms of forward Price/Sales, MTLHY is currently trading at 0.24x, which is 78.5% lower than the 1.10x industry average. The stock has gained 2.5% over the past five days to close the last trading session at $27.60.
MTLHY’s POWR Ratings reflect this promising outlook. The stock has an overall A grade, which equates to Strong Buy in our proprietary rating system.
It has an A grade for Stability and Value and a B grade for Quality. Click here to see the additional ratings for MTLHY’s Sentiment, Growth, and Momentum.
MTLHY is ranked #9 of 91 stocks in the A-rated Chemicals industry.
Ipsen S.A. (IPSEY)
Based in France, IPSEY operates as a biopharmaceutical company that focuses on oncology, neuroscience, gastroenterology, cognitive disorders, and rare diseases. The company specializes in neurotoxin research and operates three research and development centers in France, the U.K., and the U.S. It has a $7.56 billion market capitalization.
With a primary focus on Tazverik, an FDA-approved chemotherapy-free EZH2[1] inhibitor, and EZM0414, an oral SETD2 inhibitor development candidate, on June 27, 2022, IPSEY entered into a definitive merger agreement to acquire commercial-stage biopharmaceutical company Epizyme (EPZM) and close by the end of 2022 third quarter. This will help IPSEY expand its assets in oncology.
For its fiscal 2022 first year ended March 31, 2022, IPSEY’s total sales increased 12.5% year-over-year to €687.90 million ($715.45 million). IPSEY surpassed the consensus revenue estimates in each of the four trailing quarters.
The stock’s 2.56x forward EV/Sales is 30.8% lower than the 3.71x industry average. In terms of forward Price/Sales, IPSEY is currently trading at 2.52x, 42.1% lower than the 4.35x industry average. The stock has declined 2.9% over the last five days to close yesterday’s trading session at $22.91.
IPSEY’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Growth and Stability. Click here to see the additional ratings for IPSEY’s Quality, Sentiment, and Momentum.
IPSEY is ranked #13 of 171 stocks in the Medical - Pharmaceuticals industry.
AutoNation, Inc. (AN)
With a $6.80 billion market cap, AN operates as an automotive retailer that offers a range of new and used vehicles, wholesale parts, repair, maintenance, and collision services. It also provides automotive finance and insurance products that comprise vehicle services and other protection products and arranges finance for vehicle purchases through third-party finance sources.
AN’s total revenue for its fiscal 2022 first quarter ended March 31, 2022, increased 14.4% year-over-year to $6.75 billion. The company’s gross profit came in at $1.31 billion, representing a 26.7% year-over-year improvement. Its adjusted operating income came in at $477.80 million, indicating a 54.2% rise from the prior-year period.
AN’s adjusted net income came in at $362.10 million for the quarter, up 54.9% from the year-ago period. Its adjusted EPS rose 107.2% year-over-year to $5.78. As of March 31, 2022, the company had $608.10 million in cash and cash equivalents.
Analysts expect the company’s EPS to hit $23.47 for its fiscal 2022 ending December 31, 2022, representing a 29.4% rise from the prior-year period. It surpassed Street EPS estimates in each of the trailing four quarters, which is impressive.
The consensus revenue estimate of $27.99 billion for the same fiscal year represents an 8.3% year-over-year improvement. Its EPS is expected to grow at a rate of 24.7% per annum over the next five years.
The stock’s 0.41x forward EV/Sales is 61.2% lower than the 1.05x industry average. In terms of forward Price/Sales, AN is currently trading at 0.24x, 70% lower than the 0.81x industry average. Over the past week, the stock has gained 0.2% to close the last trading session at $116.58.
AN’s POWR Ratings reflect its solid prospects. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Value and a B grade for Growth and Quality. In addition to the POWR Ratings grades we have just highlighted, one can see the ratings for AN’s Sentiment, Momentum, and Stability here.
AN is ranked #4 of 24 stocks in the B-rated Auto Dealers & Rentals industry.
KT Corporation (KT)
With a $6.74 billion market capitalization, KT operates as a South Korea-based integrated telecom and digital platform service provider worldwide. The company offers principal services that include mobile, Broadband, IPTV, B2B communications, and fixed-line telephony. Its subsidiaries operate media content production, finance, real estate development, and commerce.
On June 20, 2022, KT and South Korean pharmaceutical company Hanmi Pharmaceutical co-invested in Digital Pharm, a company specializing in DTx and electroceuticals. KT plans to develop a pipeline of digital treatment devices and electroceuticals, and Hanmi will establish digital therapeutics B2H marketing to benefit from the growing digital therapeutics market.
KT’s operating revenue for its fiscal 2022 first quarter ended March 31, 2022, increased 4.1% year-over-year to KRW6.28 trillion ($4.83 billion). The company’s operating income came in at KRW626.60 billion ($482.54 million), representing a 16.5% year-over-year improvement.
Its net income was KRW455.40 billion ($350.70 million) for the quarter, indicating a 39.5% rise from the prior-year period. The company had KRW2.68 trillion ($2.07 billion) in cash and cash equivalents as of March 31, 2022.
The stock’s 0.80x forward EV/Sales is 59.7% lower than the 1.99x industry average. In terms of forward Price/Sales, KT is currently trading at 0.46x, 64.6% lower than the 1.30x industry average. Over the past five days, the stock has lost 2% to close the last trading session at $14.10.
KT’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, equating to Strong Buy in our proprietary rating system.
It has an A grade for Value and Stability and a B grade for Sentiment. Click here to see the additional ratings for KT’s Growth, Quality, and Momentum.
KT is ranked #1 of 47 stocks in the A-rated Telecom - Foreign industry.
MTLHY shares were trading at $27.06 per share on Thursday morning, down $0.54 (-1.96%). Year-to-date, MTLHY has declined -26.07%, versus a -19.86% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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