The stock market can be a fickle place, as we’ve seen this year. Starting early in January, all the main indexes fell, in a broad-based sell-off caused, at least in part, by worries over inflation and the Federal Reserve’s decision to start raising interest rates in response. The promised end of the central bank’s long-standing easy money policy spooked investors.
The currents shifted in mid-March, however, after the Fed pulled the trigger with a quarter-point rate hike. The collective mind calmed down, took a deep breath – and markets rebounded. Investors also seemed encouraged by negotiations aimed at ending the Russia-Ukraine war. The S&P 500 is officially out of correction territory now, and trending upwards.
While starting back up, markets are still down this year – and that means that plenty of stocks are down even further, since the indexes are only averages. With this in mind, we’ve used the TipRanks database to find three stocks that are showing depressed prices along with strong fundamentals – a combination that bodes well when markets are rising. They all have Strong Buy consensus ratings, while their share prices are hovering at 52-week low levels. We can find out more by taking a quick look under the hood.
Asure Software (ASUR)
We’ll start with Asure Software, a resource and solution provider in human capital management, or HCR. Asure offers software packages to make payroll and tax accounting easy. The company boasts over 80,000 small- to mid-market companies in its customer base, and processes over 33 million paychecks annually.
We are entering the US tax season, and Asure’s products are in high demand. In one example of this, the company announced in February that it had filed for over $200 million in stimulus funding on behalf of its clients.
Last month, Asure released its financial results for 4Q21. For the quarter, the company reported $21.1 million in revenue, up 29{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} year-over-year. The full-year revenue came in at $76.1 million, for a gain of 16{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} y/y. Non-GAAP net EPS was reported at 2 cents per share, compared to a break-even in 4Q20. It’s important to note that the company’s big earnings quarter is Q1.
Asure’s stock is down 24{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} so far this year. While in part this can be attributed to the general market downturn early in the year, the company’s guidance has likely not helped. While still predicting revenue growth, the company’s guidance shows it expects to slow down this year. The Q1 guidance was $23.5 million at the midline, or up 18{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} y/y, while the full year guidance, of $87.5 million at the midline, predicts a 14{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} y/y gain. On earnings, however, the 4 to 6 cent non-GAAP EPS predicted in the first quarter is less than half of the 12 cents reported in 1Q21.
Weighing in from Roth Capital, 5-star analyst Richard Baldry believes that Asure won’t be down for long. He writes: “In our view, ASUR appears poised to improve organic growth materially in 2022 as recent aggressive sales hiring yields greater productivity with deepening tenure. Therefore, with ASUR trading at only 1.8x run-rate revenues (net of net debt), or roughly 75{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} lower than our 7.3x SaaS peer average, we see material upside ahead if growth re-accelerates as we expect.”
Given all of the above, Baldry has high hopes. Along with a Buy rating, the analyst keeps a $16 price target on the stock. This target puts the upside potential at a whooping 169{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d}. (To watch Baldry’s track record, click here)
The unanimous Strong Buy consensus rating on ASUR shares, based on 6 positive analyst reviews, shows that the Street is upbeat on this stock. The average price target, at $12.08, suggests an upside of 103{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} from the current trading price of $5.95. (See ASUR stock forecast on TipRanks)
Citi Trends (CTRN)
Next up is Citi Trends, an apparel retailer specializing in discounted ‘urban chic.’ The company is based in Savannah, Georgia, and runs more than 600 brick-and-mortar stores in 33 states. Citi Trends also has a full-service online site, and a strong e-commerce presence.
After its revenues and earnings surged when the economy began to reopen in 4Q20 and 1Q21, Citi Trends has seen the top and bottom lines fall back toward the end of 2021. The Q4 financial results showed $240.9 million at the top line, down from $251.9 million in the year-ago quarter. Diluted EPS was reported at $1.16, down 35{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} from 4Q20. While these numbers showed a year-over-year drop off, they still came in above expectations. Before the release, EPS was forecast at $1.07, and the result beat that by ~8{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d}.
What hit the company hard, however, was a trim to 2021 full-year guidance issued in January. Management cited a combination of resurgent COVID and lower store traffic when cut back its full-year 2021 revenue prediction from the $1 billion to $1.015 billion range to the range of $990 million to $995 million. In the event, the 2021’s top line came in at $991.6 million.
Benchmark analyst John Lawrence is not concerned by the mixed results of the recent quarters, and lays out a case for buying this stock now
“We have been impressed by the changes implemented by the management team over the past couple of years. Our thesis continues to focus on the new CTx store format which changes the merchandise presentation. Management indicated February and March results have improved. The productivity curve is in place as better buying improves the sell through and enhances margin with reduced markdowns. Improved visibility of new unit and remodel performance is the primary catalyst going forward. The comp performance is enhanced as theremodels enter the comp base. We continue to recommend purchase,” Lawrence opined.
In light of those comments, Lawrence recommends this stock as a Buy. His $70 price target indicates a 136{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} one-year upside potential. (To watch Lawrence’s track record, click here)
Lawrence is not alone in his bullish take on Citi Trends; the stock has 4 recent analyst reviews, all positive, making for a unanimous Strong Buy analyst consensus rating. Shares are trading for $29.65 and their $63.75 average price target implies an upside of 115{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} from that level. (See CTRN stock forecast on TipRanks)
Floor & Decor Holdings (FND)
Last up is Floor & Decor Holdings. Founded back in 2000, and based in Atlanta, Georgia, the company offers a wide range of hard-surface flooring for everything from homes to stores to offices. The company operates 2 design studios and 160 large warehouse stores, averaging 78,000 square feet, in 33 states. The company caters to professional contractors, home improvement retailers, and do-it-yourselfers. Floor & Decor offers a range of products, from laminate flooring to vinyl to tiles to wood to natural stone.
In the past two months, FND has opened 7 new stores, in locations as far-flung as Portland, Oregon; Chicago, Illinois; and McAllen, Texas. These openings are part of a concerted plan by management to reach 400 stores in the coming decade; the company plans to open a total of 32 stores this year alone.
That ambitious plan is fueled by rising revenues and earnings that, until the most recently reported quarter (4Q21) had been consistently beating expectations. At the top line, the last report showed $914.3 million, up 26{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} year-over-year. At the bottom line, diluted EPS came in at 44 cents. This was the second quarter in a row with a sequential earnings decline, and the result was down more than 6{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} y/y.
Looking ahead, the company estimates full-year 2022 revenues to come in at approximately $4.325 billion. This would represent a gain of 26{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} y/y. Despite the growth, FND shares have fallen 36{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} so far this year.
Well Fargo’s 5-star analyst Zachary Fadem sees high potential for Floor & Decor going forward, especially in the pro contractor niche. He writes of this stock: “FND sits among the few unicorns in retail, with a business model strong enough to post consistently strong (MSD{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d}+) comps, +20{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} unit growth and a host of opportunity from Pro initiatives, an emerging design concept and inorganic Commercial growth… At 32x NTM PE (-19{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d}/-24{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} vs 3/5 year avg.), we see a compelling LT entry point for one of the highest quality growth stories in all of retail.”
This, among other things, including residential remodeling and an addressable market totaling $49 billion to $54 billion, leads Fadem to set an Overweight (i.e. Buy) rating on FND shares, and his $130 price target suggests an upside potential of 56{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d} for the year ahead. (To watch Fadem’s track record, click here)
Overall, this stock has picked up plenty of interest from Wall Street – in the form of 15 recent analyst reviews. These break down 12 to 3 in favor of Buy over Hold, propping up the Strong Buy consensus. The shares are trading at $83.28 and their $129.80 average target suggests a one-year upside of ~56{f32667846e1257729eaaee80e922ba34a93c6414e9ad6261aff566c043b9e75d}. (See FND stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
