The economy will probably enter a recession in this year due to tighter lending standards and higher interest rates. It may be prudent to sell the fundamentally weak stocks Owens & Minor, ASOS (ASOMY) and Kaleyra. Continue reading ....
Although the Federal Reserve has set a long-term inflation target, inflation is still well below that. At its next policy meeting, scheduled for this week, the Fed is likely to raise interest rates. According to experts, tighter lending criteria and higher interest rates will tip the economy this year into recession.
It is prudent to avoid Owens & Minor, Inc., ASOS Plc, and Kaleyra, Inc., given the current situation.
Discuss why you expect the stock market to be under pressure in 2019.
The Consumer Price Index data for March confirmed that inflation was on the decline. Prices rose by 0.1% sequentially, and by 5% annually. Core consumer prices, excluding food and energy, increased by 0.4% over the course of a year and 5.6% sequentially. The U.S. economy also added 236,000 new jobs in March. This indicates a healthy job market.
Several economists believe that the Federal Reserve is going to increase the federal funds rate by 25 basis points this week. This will be the first rate hike since mid-2007.
The minutes of the Fed meeting in March show that staff members believe there may be a slight recession this year. In the summary of the meeting, it was stated that "given their assessment on the potential economic impacts of recent banking-sector development, the staff's projected at the time the March meeting included mild recession beginning later this year with a recovery in the following two years."
It may be prudent to avoid these stocks. Let's look at their fundamentals.
Owens & Minor, Inc. (OMI)
OMI is a healthcare solution company. It is divided into two segments: Products & Healthcare Services and Patient Direct. The Products & Healthcare Services Segment offers a range of products and services for healthcare providers and manufacturers. Patient Direct offers products and services to help patients at home, including diabetes treatment, respiratory therapy and treatment for obstructive sleeping apnea.
OMI's gross profit margin of 18.35% for the trailing 12-month period is 67% less than the industry average of 55.66%. The industry average is 4.63%. Its 1.59% Capex/Sales trailing-12 months is 67% lower.
OMI's adjusted Operating Income for the Fourth Quarter ended December 31, 2020 decreased 20.9% from the prior year to $67.16 millions. Its adjusted net profit decreased by 64.6% compared to the previous quarter, reaching $21.71 millions. Its adjusted EPS also decreased 65.4% from the prior-year quarter to $0.28.
Analysts expect OMI to have a negative EPS in the quarter ending March 31, 2023. The revenue is expected to drop 0.1% from the previous year to $2.40billion. OMI stock fell 57.7% in the past year to close at $15.54 during the last trading session.
The POWR ratings of OMI reflect its weak prospects. The stock is rated D, which is equivalent to Sell in our proprietary system. The POWR ratings are calculated using 118 factors with each factor being weighted optimally.
It is ranked #109 out of 141 stocks within the D-rated Medical – Devices & Equipment sector. It is rated D for Growth and F for Sentiment. Click here to view the other ratings for OMI, including Value, Momentum and Stability.
ASOS Plc (ASOMY)
ASOMY is an online fashion retailer based in London, United Kingdom. The company sells both women's and men's clothing. It sells products under ASOS Design and ASOS Edition brands.
ASOMY’s EBITDA trailing 12-month margin of 0.78% is 93.1% less than the industry average of 11.40%. The trailing 12-month EBITDA margin of ASOMY is negative 0.27%, compared to an industry average of 7.79%. The stock's trailing-12 month Capex/Sales ratio of 1.87% is 41.8% less than the average industry figure of 3.21%.
ASOMY's gross profits for the period ending August 31, 2022 fell 3.3% from the previous year to PS1.72 (US$2.16 billion). The operating loss was PS9.80 ($12.31) million, compared to a profit of PS190.10 ($238.86) million in the previous period.
The loss attributable by the owners of parent company was PS30.80 ($38.70) million, compared with a profit of PS128.40 ($161.33 millions) attributable by the owners of parent company in the previous period.
The stock price has dropped 45.8% in the last year to $9.33 at the close of the last trading day.
ASOMY's Power Ratings reflect the bleak outlook. The stock is rated D, which is equivalent to a sell in our proprietary system.
It is ranked 48th out of 65 stocks in the F-rated Internet Industry. It is rated D for Growth, Sentiment and Quality. Click here to see ASOMY's other ratings for Value, Momentum and Stability.
Kaleyra, Inc. (KLR)
KLR, headquartered in Milan, Italy provides mobile communication solutions to financial institutions, ecommerce players, OTTs and software companies. They also provide services for healthcare providers, retailers and logistical enablers.
KLR announced on April 3, 2023 that it had received a notice in writing from the New York Stock Exchange stating that the company did not meet the listing standards under Section 802.01B of NYSE's Listed Company Manual, as its average capitalization over a 30 day trading period was below $50 million. The company's last reported equity was also less than $50m.
KLR's average 30 trading day market capitalization as of March 31 2023 was $31,50 million. Its last reported equity stockholders was $42,20 million at December 31, 2022.
KLR's gross profit margin of 20.67% for the 12 months following is 59% less than industry average. The EBIT margin for the trailing 12 months is negative 11.13 % compared to a 4.53% average industry. The stock's trailing-12 month Capex/Sales of 0.62% is 74.1% less than the industry standard of 2.39%.
KLR's fourth-quarter adjusted gross profit ended December 31, 2020 decreased 16.5% from the previous year to $19.01 millions. Total operating expenses increased by 187.8% over the past year to $74.22 millions. The company's nonGAAP loss was $4.42m, compared with a nonGAAP income of $3.91m in the previous period.
Also, the non-GAAP loss was $0.10 per share, as opposed to $0.08 non-GAAP earnings per share in the prior period. Its adjusted EBITDA also declined by 74.3% to $2.47million.
Analysts expect KLR to have a negative EPS in the quarter ending March 31, 2023. Analysts expect its revenue to drop 2% from the previous year to $78.88 millions for the same period. In each of the four previous quarters, it failed to exceed consensus estimates for EPS. In the past year the stock price has fallen 90.5%, closing the last trading day at $1.84.
The POWR ratings of KLR reflect the grim outlook for KLR. Its overall rating is D, which in our proprietary system translates into a Sell.
It is rated D for quality and F for sentiment. It is ranked 44th out of 46 companies in the Telecom-Foreign industry. Click here to view the other ratings for KLR in Growth, Value Momentum and Stability.
OMI shares were unchanged during premarket trading on Monday. OMI shares have declined by -20.43% year-to-date compared to a 9.09% increase in the benchmark S&P 500 Index during the same time period.
About the Author: Dipanjan B.
Dipanjan has been interested in stock markets since he was a child. Dipanjan obtained a Master's Degree in Finance and Accountancy. Dipanjan is a financial journalist and investment analyst. He has a keen interest in reading about and analyzing new trends in the financial markets.