For all the frightening headlines of trade wars, rising interest rates and overheated stock markets, the broad indexes are all up for 2018. But there are always stocks that are down significantly, and screening the worst performers can highlight potential bargains.
Looking at the S&P 1500 Composite Index (comprising the S&P 500 SPX, +0.74% the S&P 400 Mid Cap Index MID, +0.91% and the S&P 600 Small Cap Index SML, +0.53% ), 104 stocks had plummeted at least 20%, including reinvested dividends, for 2018 through July 6.
Narrowing the list further, 81 of those companies had increased their sales per share for the most recently reported 12-month period from the year-earlier 12-month period and 29 had improved their gross profit margins at the same time.
Of those, 17 also improved their sales per share and gross margins for their most recently reported quarters from a year earlier. That could signal investors have been overreacting and that there are opportunities for bottom-fishers.
At many of these companies, shares have pulled back following major gains in 2017.
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Here they are, sorted by how poorly their shares have performed this year (the sales and margin figures will follow, along with a summary of analysts’ opinions of the companies):
Company Ticker Industry Total return - YTD Total return - 2017 Total return - 3 years Total Return - 5 years MiMedx Group Inc. MDXG, +6.81% Biotechnology -73% 42% -70% -51% Coherent Inc. COHR, +2.40% Electronic Equipment/Instruments -44% 105% 152% 169% Thor Industries Inc. THO, +1.94% Recreational Products -34% 52% 85% 114% C&J Energy Services Inc. CJ, -0.13% Oilfield Services/Equipment -30% N/A N/A N/A Exelixis Inc. EXEL, -0.80% Biotechnology -30% 104% 504% 335% Coty Inc. Class A COTY, -0.07% Household/Personal Care -28% 12% -53% -10% Kennametal Inc. KMT, +2.58% Industrial Machinery -26% 58% 15% 2% Electro Scientific Industries Inc. ESIO, +8.17% Electronic Production Equipment -25% 262% 211% 46% Albemarle Corp. ALB, +0.20% Chemicals: Specialty -25% 50% 85% 63% Core-Mark Holding Co. CORE, +1.14% Wholesale Distributors -24% -26% -18% 57% Avis Budget Group Inc. CAR, +4.21% Finance/Rental/Leasing -24% 20% -23% 4% Koppers Holdings Inc. KOP, -0.44% Chemicals: Specialty -22% 26% 66% 6% Oshkosh Corp. OSK, +3.28% Trucks/Construction/Farm Machinery -21% 42% 79% 97% Patterson-UTI Energy Inc. PTEN, +3.79% Contract Drilling -21% -14% 9% -9% Celgene Corp. CELG, +1.55% Biotechnology -21% -10% -31% 35% Parker-Hannifin Corp. PH, +1.68% Industrial Machinery -21% 45% 44% 77% Nektar Therapeutics NKTR, -0.49% Biotechnology -20% 387% 304% 297% Source: FactSetYou can click on the tickers for more information about each company, including news coverage, price ratios, charts and financial data.
Here’s how the group’s sales per share and gross profit margins have improved over the past 12 months:
Company Ticker Sales per share - past 12 months Sales per share - year-earlier 12-month period Increase in sales per share Gross margin - past 12 months Gross margin - year-earlier 12-month period MiMedx Group Inc. MDXG, +6.81% $2.65 $2.03 31% 87.57% 86.59% Coherent Inc. COHR, +2.40% $76.72 $50.17 53% 45.48% 43.57% Thor Industries Inc. THO, +1.94% $158.78 $125.27 27% 16.25% 15.16% C&J Energy Services Inc. CJ, -0.13% $29.17 $11.49 154% 14.81% -11.97% Exelixis Inc. EXEL, -0.80% $1.87 $0.92 103% 97.00% 96.47% Coty Inc. Class A COTY, -0.07% $12.45 $12.15 2% 58.58% 57.87% Kennametal Inc. KMT, +2.58% $27.73 $25.00 11% 33.55% 31.41% Electro Scientific Industries Inc. ESIO, +8.17% $10.40 $4.95 110% 46.94% 41.07% Albemarle Corp. ALB, +0.20% $28.42 $24.19 18% 36.77% 36.18% Core-Mark Holding Co. CORE, +1.14% $345.14 $323.40 7% 5.06% 5.04% Avis Budget Group Inc. CAR, +4.21% $107.74 $95.48 13% 25.10% 23.76% Koppers Holdings Inc. KOP, -0.44% $70.79 $66.60 6% 18.98% 17.92% Oshkosh Corp. OSK, +3.28% $98.49 $84.44 17% 17.03% 16.86% Patterson-UTI Energy Inc. PTEN, +3.79% $13.32 $6.33 111% -1.88% -42.46% Celgene Corp. CELG, +1.55% $17.09 $14.25 20% 93.95% 92.92% Parker-Hannifin Corp. PH, +1.68% $102.82 $84.48 22% 24.62% 23.57% Nektar Therapeutics NKTR, -0.49% $2.00 $0.92 118% 90.76% 79.07% Source: FactSetLooking at sales per share, rather than raw revenue, incorporates any dilution from the issuance of new shares, while also showing the effect of any lowering of share counts from stock repurchases.
A company’s gross margin is its sales, less the cost of goods and services sold, divided by sales. It doesn’t take overhead expenses into account, but gives an indication of whether a company is becoming more reliant on discounting. It is generally a good sign to see margins expanding as sales rise.
Here’s how quarterly sales per share and gross margins have improved:
Company Ticker Sales per share - most recent reported quarter Sales per share - year earlier Increase in sales per share Gross margin - most recent reported quarter Gross margin - year earlier MiMedx Group Inc. MDXG, +6.81% $0.72 $0.57 26% 88.16% 86.61% Coherent Inc. COHR, +2.40% $19.24 $17.08 13% 44.16% 43.23% Thor Industries Inc. THO, +1.94% $42.60 $38.19 12% 16.61% 16.32% C&J Energy Services Inc. CJ, -0.13% $8.22 $5.59 47% 16.09% 6.63% Exelixis Inc. EXEL, -0.80% $0.68 $0.26 159% 97.34% 96.04% Coty Inc. Class A COTY, -0.07% $2.96 $2.72 9% 59.69% 58.36% Kennametal Inc. KMT, +2.58% $7.31 $6.50 13% 35.64% 34.75% Electro Scientific Industries Inc. ESIO, +8.17% $3.16 $1.51 110% 48.26% 36.52% Albemarle Corp. ALB, +0.20% $7.34 $6.37 15% 37.24% 36.56% Core-Mark Holding Co. CORE, +1.14% $82.38 $75.52 9% 5.18% 4.91% Avis Budget Group Inc. CAR, +4.21% $24.30 $21.46 13% 18.24% 16.10% Koppers Holdings Inc. KOP, -0.44% $18.33 $15.94 15% 21.28% 16.71% Oshkosh Corp. OSK, +3.28% $24.99 $21.35 17% 17.33% 16.49% Patterson-UTI Energy Inc. PTEN, +3.79% $3.66 $1.91 92% 1.27% -26.72% Celgene Corp. CELG, +1.55% $4.64 $3.54 31% 93.77% 93.20% Parker-Hannifin Corp. PH, +1.68% $27.62 $22.92 21% 24.91% 23.91% Nektar Therapeutics NKTR, -0.49% $0.24 $0.16 47% 82.52% 75.21% Source: FactSetHere’s a summary of how sell-side analysts feel about these companies:
Company Ticker Share 'buy' ratings Share neutral ratings Share 'sell' ratings Total number of ratings Closing price - July 6 Consensus price target Implied 12-month upside potential MiMedx Group Inc. MDXG, +6.81% N/A N/A N/A 0 $3.35 N/A N/A Coherent Inc. COHR, +2.40% 100% 0% 0% 9 $157.83 $240.11 52% Thor Industries Inc. THO, +1.94% 82% 18% 0% 11 $99.09 $143.13 44% C&J Energy Services Inc. CJ, -0.13% 83% 17% 0% 12 $23.30 $34.91 50% Exelixis Inc. EXEL, -0.80% 90% 10% 0% 10 $21.21 $32.69 54% Coty Inc. Class A COTY, -0.07% 44% 50% 6% 18 $14.16 $16.88 19% Kennametal Inc. KMT, +2.58% 33% 59% 8% 12 $35.66 $45.80 28% Electro Scientific Industries Inc. ESIO, +8.17% 100% 0% 0% 4 $16.03 $32.25 101% Albemarle Corp. ALB, +0.20% 76% 20% 4% 25 $95.54 $124.76 31% Core-Mark Holding Co. CORE, +1.14% 71% 29% 0% 7 $23.74 $26.50 12% Avis Budget Group Inc. CAR, +4.21% 56% 22% 22% 9 $33.41 $45.88 37% Koppers Holdings Inc. KOP, -0.44% 33% 67% 0% 3 $39.70 $53.50 35% Oshkosh Corp. OSK, +3.28% 61% 39% 0% 18 $70.94 $94.18 33% Patterson-UTI Energy Inc. PTEN, +3.79% 71% 25% 4% 28 $18.08 $24.83 37% Celgene Corp. CELG, +1.55% 59% 38% 3% 29 $82.44 $113.18 37% Parker-Hannifin Corp. PH, +1.68% 58% 42% 0% 19 $156.82 $190.29 21% Nektar Therapeutics NKTR, -0.49% 82% 18% 0% 11 $47.64 $94.90 99% Source: FactSetInvestors should take the ratings of sell-side analysts (the ones who work for brokerage firms) with a grain of salt because the analysts shy away from “sell” ratings. Then again, reading the analysts’ reports (which your broker may be able to provide) can help you with your own research.
If you are interested in considering any of these companies for long-term investments following their significant declines this year, you need to do your own research to determine whether you believe the price pullbacks are only temporary setbacks to otherwise healthy prospects for continued success against competitors over the next decade, or whether the declines signal something deeper.
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