Concerns over aggressive interest rate hikes to fight the multi-decade high inflation and the possibility of the economy entering a recession have led to a broad market correction in the first half of 2022. After the most aggressive hike since 1994, the Federal Reserve has signaled further interest rate increases this year to tame the surging inflation.
Therefore, the sky-high valuations of several growth stocks have declined significantly. Growth stocks look less attractive to investors in a rising interest rate environment.
However, the price decline of many quality growth stocks could be an excellent buying opportunity for long-term investors. The recent market meltdown highlights the importance of building resilience in one’s portfolio, which could be achieved by investing in stocks possessing strong balance sheets and solid growth prospects.
Investors can consider investing in fundamentally sound stocks Sanderson Farms, Inc. (SAFM), Mannatech, Incorporated (MTEX), and Sensus Healthcare, Inc. (SRTS) at their current price levels to capitalize on their solid growth prospects.
Sanderson Farms, Inc. (SAFM)
SAFM is an integrated poultry processing company that produces, processes, and distributes fresh, frozen, and prepared chicken products. It offers ice-packed, chill-packed, bulk-packed, and frozen chicken under its brand name to retailers, distributors, and casual dining operators in the United States and customers who resell frozen chicken into export markets.
On March 29, SAFM's feed mill was named Integrator Feed Facility of the Year by the American Feed Industry Association, Feedstuffs, and the U.S. Poultry & Egg Association. Such recognition reflects the company's quality of work and efficient efforts.
During the fiscal second quarter (ended April 30, 2022), SAFM's net sales increased 35.8% year-over-year to $1.54 billion. Its operating income rose 230.1% from the year-ago value to $421.49 million. Net income grew 231.4% from the same period last year to $321.19 million, while its EPS came in at $14.39, representing a 231.6% increase year-over-year.
SAFM’s revenue has grown at a CAGR of 20.2% over the past three years. The company’s EBITDA grew at a CAGR of 131.3% over the past three years.
Analysts expect SAFM's revenues to increase 30.8% year-over-year to $1.77 billion in the fiscal third quarter (ending July 2022). Its EPS is expected to increase 86.7% to $13.78 in the ongoing quarter. The company has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 13.1% year-to-date to close the last trading session at $216.17.
SAFM's strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has an A grade for Growth and Quality and a B grade for Value. The stock is ranked #3 of 89 stocks in the B-rated Food Makers industry.
Click here to see the other ratings of SAFM for Momentum, Stability, and Sentiment.
Mannatech, Incorporated (MTEX)
MTEX operates as a health and wellness company. It provides nutritional supplements, topical and skin care, anti-aging products, and weight-management products through e-commerce and network marketing channels.
During the fiscal 2022 first quarter (ended March 31, 2022), MTEX’s total operating expenses decreased 10.8% year-over-year to $25.26 million. Also, its total assets increased 2.5% to $61.14 million compared to $59.63 million for the fiscal year ended December 31, 2021.
MTEX’s EBITDA has grown at a CAGR of 24.4% over the past three years. The company’s EBIT grew at a CAGR of 46.6% over the past three years.
Over the past month, the stock has declined 29.2% to close the last trading session at $17.00.
MTEX has an overall A rating, equating to a Strong Buy in our POWR Ratings system. It also has an A grade for Growth, Value, and Quality and a B for Sentiment. The stock is ranked first out of 70 stocks in the Consumer Goods industry.
Click here to see the other ratings of MTEX for Momentum and Stability.
Sensus Healthcare, Inc. (SRTS)
SRTS is a medical device company that provides non-invasive treatments for oncological and non-oncological skin conditions. It uses superficial radiation therapy (SRT) in its portfolio of treatment devices: the SRT-100, SRT-100 Plus, and SRT-100 Vision.
On March 9, 2022, the company’s Board of Directors announced a repurchase of $3 million in shares of its common stock. Such share repurchases should boost shareholder returns significantly.
SRTS’ revenues increased 237% year-over-year to $10.34 million for the first quarter ended March 31, 2022. The company’s net income came in at $16.06 million, compared to a net loss of $1.12 million in the year-ago period. Also, its adjusted EBITDA and EPS increased significantly year-over-year to $16.86 million and $0.97, respectively.
SRTS’ revenue has grown at a CAGR of 16.3% over the past five years. The company’s total assets grew at a CAGR of 16.9% over the past three years.
Analysts expect SRTS’ EPS and revenue for the quarter ending June 30, 2022, to increase 750% and 123.1% year-over-year to $0.13 and $9.55 million, respectively. It has surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 9.8% year-to-date to close the last trading session at $7.93.
SRTS’ POWR Ratings reflect this promising outlook. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It has an A grade for Growth, Sentiment, and Quality and a B grade for Value. It is ranked #5 out of 148 stocks in the Medical - Devices & Equipment industry. To see the other ratings of SRTS for Momentum and Stability, click here.
SAFM shares were trading at $214.99 per share on Wednesday morning, down $1.18 (-0.55%). Year-to-date, SAFM has gained 13.04%, versus a -18.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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