The stock market has experienced a sell-off of late due to investor concerns about the Fed’s aggressive interest rate increases to tame inflation and a prospective economic contraction. dynamic, the sell-off has created opportunities for investors to buy quality stocks at bargain prices. We think Horizon Therapeutics (HZNP), TDK (TTDKY), ACI Worldwide (ACIW), and MaxLinear (MXL), which are trading at discounts to their peers, are screaming buys now, considering their strong fundamentals. So, let’s discuss these names.
The stock market extended its losses yesterday after witnessing its worst day since June 2020 on Wednesday. The S&P 500 inched closer to bear market territory after declining 0.6% in the last trading session to close at 3,900.79. The Nasdaq Composite and the Dow Jones Industrial Average shed 0.2% and 0.7%, respectively, to close at 11,388.50 and 31,253.13.
The sell-off in equities has been fueled by investor worries about the Federal Reserve’s potential interest rate hikes to tame surging inflation and a consequent economic slowdown. However, the market’s continuing correction has led many quality stocks to trade now at reasonable valuations.
We think it could be wise to bet on fundamentally sound stocks Horizon Therapeutics Public Limited Company (HZNPTDK Corporation (TTDKY), ACI Worldwide, Inc. (ACIW), and MaxLinear, Inc. (MXL), which look significantly undervalued at their current price levels.
Horizon Therapeutics Public Limited Company (HZNP)
Headquartered in Dublin, Ireland, HZNP is a biotechnology company focused on researching, developing, and commercializing medicines that address the critical needs of people impacted by rare, autoimmune, and serious inflammatory diseases. The company’s portfolio comprises approximately 12 medicines for rare diseases, gout, ophthalmology, and inflammation. It has two reportable segments: orphan and inflammation.
On May 9, 2022, HZNP announced a multi-year partnership with Chicago Sky that includes robust community programming and marketing and branding assets. HZNP’s Chairman, President, and CEO, Tim Walbert, said, “I look forward to building meaningful community initiatives together that advance the understanding and dialogue around pressing social issues, including equity education and social justice.”
In terms of forward non-GAAP P/E and PEG, HZNP’s respective 15.02x and 0.92 are lower than the 19.29x and 1.84x industry averages. Furthermore, its 13x forward EV/EBIT is 22.7% lower than the 16.82x industry average.
HZNP’s net sales increased 158.5% year-over-year to $885.20 million for the first quarter, ended March 31, 2022. The company’s non-GAAP net income increased 6,479.1% year-over-year to $315.80 million. Also, its adjusted EBITDA increased 767.2% year-over-year to $371.20 million. Its non-GAAP EPS came in at $1.34, representing a 6,600% increase year-over-year.
Analysts expect HZNP’s EPS and revenue for its fiscal 2022 to increase 28.6% and 23% to $5.94 and $3.97 billion, respectively. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past month, the stock has declined 22.1% in price to close the last trading session at $89.34.
HZNP’s POWR Ratings reflect solid prospects. The company has an overall B rating, which translates to a Buy in our proprietary rating system. The POWR Ratings assesses stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Sentiment and a B grade for Growth and Value. It is ranked #22 among 166 stocks in the Medical – Pharmaceuticals industry. Click here to see the other ratings of HZNP for Momentum, Stability, and Quality.
TDK Corporation (TTDKY)
Headquartered in Tokyo, Japan, TTDKY manufactures and sells electronic components. The company operates through four segments: Passive Components; Sensor Application Products; Magnetic Application Products; Energy Application Products, and Other.
On April 26, 2022, TTDKY announced that its subsidiary TDK Ventures Inc. had invested in 5G infrastructure innovator Verana Networks to accelerate bringing its 5G radio access network (RAN) technology to the market. The investment in Verana should enable TDK Ventures to achieve its vision of faster digital transformation and improvement in 5G communications along with Fixed Wireless Access (FWA), IoT, and AR/VR.
In terms of forward P/E and EV/EBITDA, TTDKY’s respective 11.18x and 4.98x are lower than the 22.72x and 11.92x industry averages. Furthermore, its 9.90x forward EV/EBIT is 36.7% lower than the 15.64x industry average.
For its fiscal year ended March 31, 2022, TTDKY’s net sales increased 28.6% year-over-year to ¥1.90 billion ($14.85 million). The company’s net income attributable increased 123.7% year-over-year to ¥177.50 million ($1.38 million). Also, its EPS came in at ¥467.29, representing a 123.6% year-over-year increase.
For its fiscal year 2023, TTDKY’s revenue is expected to increase 386.5% year-over-year to $15.74 billion. Over the past six months, the stock has declined 20.6% in price to close the last trading session at $33.56.
TTDKY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B grade for Value, Stability, and Sentiment. Within the Technology – Hardware industry, it is ranked #3 out of 44 stocks. To see the other ratings of TTDKY for Momentum and Quality, click here.
ACI Worldwide, Inc. (ACIW)
ACIW in Naples, Fla., Develops, markets, installs, and supports a line of software products and solutions that are focused on facilitating real-time digital payments. Its segments include ACI on Demand and ACI on Premise. Its solutions include ACI Acquiring, ACI Issuing, ACI Enterprise Payments Platform, ACI Low-Value Real-Time Payments, ACI High-Value Real-Time Payments, ACI Omni Commerce, ACI Secure eCommerce, ACI Fraud Management, ACI Digital Business Banking, and ACI Speedpay.
On April 28, 2022, ACIW announced that it had formed a partnership with Prolific Banking, Inc. The partnership should help enable Prolific’s On-Ramp solution to be integrated into ACI Universal Online Banker, which is part of the ACI Digital Business Banking solution and supports Enrollment-as-a-Service. ACIW’s VP of Digital Channels, Jim Gillespie, said, “This is an example of the extensibility of ACI Universal Online Banker APIs for ease of use by fintech innovators on behalf of our mutual bank customers.”
In terms of forward non-GAAP P/E and PEG, ACIW’s respective 12.79 and 0.85x are lower than the 18.07x and 1.34x industry averages. Furthermore, its 9.65x forward EV/EBITDA is 19% lower than the 11.92x industry average.
ACIW’s total revenues increased 13% year-over-year to $323.08 million for the first quarter, ended March 31, 2022. The company’s increased adjusted EBITDA 49.5% year-over-year to $67.60 million. Also, the company’s net income came in at $15.49 million, compared to a $1.94 million net loss in the year-ago period.
Analysts expect ACIW’s EPS and revenue for the quarter ending June 30, 2022, to increase 140% and 9.4%, respectively, year-over-year to $0.12 and $330.08 million. Over the past year, the stock has declined 33.7% in price to close the last trading session at $25.77.
ACIW’s POWR Ratings reflects this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B grade for Value and Sentiment. It is ranked #12 out of 107 stocks in the Financial Services (Enterprise) industry. Click here to see the other ratings of ACIW for Momentum, Stability, and Quality.
MaxLinear, Inc. (MXL)
MXL is an integrated circuit design company. Its products integrate all or substantial portions of a communication system, including radiofrequency, mixed-signal, digital signal processing, security engines, data compression, networking layers, and power management. The Carlsbad, Calif., The company provides communications systems-on-chip (SoC) solutions in broadband, mobile, wireline infrastructure, data center, and industrial and multi-market applications.
On May 5, 2022, MXL announced that it would buy Taiwan-based Silicon Motion Technology Corp. for $3.80 billion, thereby creating one of the largest fabless semiconductor suppliers in the world. The combined entity should be able to expand into the enterprise, consumer, and many other growth markets with $2 billion in combined revenue annually and a market opportunity of $15 billion.
In terms of forward non-GAAP P/E and PEG, MXL’s respective 9.51 and 0.30x are lower than the 17.95x and 1.33x industry averages. Moreover, its 8.04x forward EV/EBITDA is 33.7% lower than the 12.14x industry average.
For its fiscal first quarter ended March 31, 2022, MXL’s net revenue increased 26% year-over-year to $263.92 million. The company’s non-GAAP net income increased 85.2% year-over-year to $80.23 million. Also, its non-GAAP EPS came in at $1, representing an 81.8% year-over-year increase.
For the quarter ended June 30, 2022, MXL’s EPS and revenue are expected to increase 90.6% and 36.2%, respectively, year-over-year to $1.01 and $279.76 million. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has declined 48.9% in year-to-date price to close the last trading session at $38.50.
MXL’s POWR Ratings reflect these solid prospects. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B grade for Value and Quality. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #12 out of 95 stocks. To see the other ratings of MXL for Momentum, Stability, and Sentiment, click here.
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HZNP shares were unchanged in premarket trading Friday. Year-to-date, HZNP has declined -17.09%, versus a -17.75% rise in the benchmark S&P 500 index during the same period.
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.