Hammered and bruised by high inflation and interest rates last year, the stock market made a strong comeback this year with significant gains. However, with stalling disinflation and fears surrounding progressive interest rate hikes, the market recovery is on shaky grounds. Therefore, let’s take a look at some of the smart stocks, General Motors Company (GM) and Limbach Holdings, Inc. (LMB), to consider this month which could help mitigate the storm.
This year just as the stock market started to make a comeback from its painful losses of 2022, inflation reared its head again. Recent data released by the U.S. Department of Commerce showed that the Fed's preferred consumer prices gauge rose by 5.4% annually and 0.6% sequentially in January, edging higher from December's figures.
Subsequently, despite a solid start to the year, all major indexes posted their second negative month in three. In addition, a sharp jump in Treasury yields dented investor sentiment for stocks, as they feared that more painful interest rate hikes would remain in place for longer. Yesterday, the benchmark 10-year U.S. Treasury note hit its highest since November.
Despite the Consumer Price Index (CPI) easing for the seventh consecutive month, analysts remain skeptical about the ability of the Fed to engineer a soft landing without entering a mild recession this year. Furthermore, “Bond King” Jeffrey Gundlach warned about an impending recession and advised investors to prepare for it.
Amid this backdrop, the stock market is anticipated to remain volatile for a while. Therefore, fundamentally sound stocks GM and LMB could be smart additions to your portfolio this month.
General Motors Company (GM)
GM designs, builds, and sells trucks, crossovers, cars, and automobile parts and accessories worldwide. The company operates through GM North America; GM International; Cruise; and GM Financial segments.
On February 9, GM and GlobalFoundries Inc. (GFS) announced a strategic, long-term agreement to establish a dedicated capacity corridor exclusively for GM’s chip supply. This agreement should help GM reduce the number of unique chips required to power its complex, tech-heavy vehicles.
On January 31, Lithium Americas Corp. (LAC) and GM announced that they would jointly invest in developing the Thacker Pass mine in Nevada, with GM investing $650 million in LAC. It is the most significant investment by an automaker to produce battery raw materials. The lithium carbonate from Thacker Pass is expected to be used in GM’s Ultium battery cells.
In terms of forward non-GAAP P/E, GM is trading at 6.37x, 56.1% lower than the industry average of 14.49x. Likewise, its forward Price/Sales multiple of 0.34 is 63.6% lower than the industry average of 0.93.
For the fiscal fourth quarter that ended December 31, 2022, GM’s revenue increased 28.4% year-over-year to $43.11 billion. Its net income attributable to stockholders increased 14.8% year-over-year to $2 billion. In addition, its adjusted EPS came in at $2.12, representing a 57% increase from the year-ago quarter.
The stock’s EBITDA and EBIT grew at CAGRs of 11.8% and 23%, respectively, over the past three years. Moreover, its revenue grew at a CAGR of 4.5% over the same period.
GM’s revenue for the quarter ending March 31, 2023, is expected to increase 9.1% year-over-year to $39.24 billion. Its EPS for the quarter ending June 30, 2023, is expected to increase 41.4% year-over-year to $1.61. It surpassed the consensus EPS estimates in each of the trailing four quarters, which is excellent.
Shares of GM have gained 16.9% year-to-date to close the last trading session at $38.74.
GM’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It also has a B grade for Growth, Value, and Sentiment. Out of 61 stocks in the Auto & Vehicle Manufacturers industry, it is ranked #20.
Click here to see the additional POWR Ratings of GM for Momentum, Stability, and Quality.
Limbach Holdings, Inc. (LMB)
LMB is an integrated building systems solutions firm with expertise in the design, prefabrication, installation, management, and maintenance of mechanical, electrical, plumbing, and control systems, as well as heating, ventilation, and air-conditioning (HVAC) system. It operates in two segments, General Contractor Relationships and Owner Direct Relationships.
In terms of forward EV/Sales, LMB is trading at 0.34x, which is 80.6% lower than the industry average of 1.74x. Likewise, its forward Price/Sales of 0.29x is 79.5% lower than the industry average of 1.41x.
LMB’s gross profit came in at $24.85 million for the quarter that ended September 30, 2022, up marginally year-over-year. During the same period, its net income and EPS amounted to $3.64 million and $0.34, respectively. In addition, its adjusted EBITDA grew 25.7% from the year-ago value to $10.20 million.
The company’s cash and cash equivalents came in at $28.42 million for the period that ended September 30, 2022, compared to $14.48 million for the period that ended December 31, 2021.
Over the past three years, LMB’s EBITDA and net income grew at 10.1% and 96.8% CAGRs, respectively. Its EPS grew at a 77.3% CAGR over the same period.
The consensus EPS estimate of $0.02 for the first quarter (ending March 31, 2023) represents a 113.30% improvement year-over-year. The consensus revenue estimate of $114.90 million for the ongoing quarter indicates a marginal increase year-over-year. The company has an impressive earnings surprise history, surpassing the EPS estimates in three of the trailing four quarters.
Over the past nine months, the stock has gained 158.8% to close the last trading session at $14.15.
It’s no surprise that LMB has an overall A rating, equating to a Strong Buy in our proprietary rating system. Also, the stock has an A grade for Sentiment and a B for Value, Momentum, and Quality. Within the A-rated Industrial – Services industry, it is ranked #6 out of 83 stocks.
To see LMB’s additional POWR Ratings for Growth and Stability, click here.
What To Do Next?
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What gives these stocks the right stuff to become big winners, even in this brutal stock market?
First, because they are all low-priced companies with the most upside potential in today’s volatile markets.
But even more important is that they are all top Buy rated stocks according to our coveted POWR Ratings system, and they excel in key areas of growth, sentiment and momentum.
Click below now to see these 3 exciting stocks that could double or more in the year ahead.
GM shares were unchanged in premarket trading Wednesday. Year-to-date, GM has gained 15.78%, versus a 3.54% 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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