Rising interest rates, high inflation, an inverted yield curve, and an unexpected banking crisis have raised the odds of a recession this year.
Therefore, I present quality stocks Limbach Holdings, Inc. (LMB), Nature’s Sunshine Products, Inc. (NATR), and LifeVantage Corporation (LFVN) with high profitability and potential to deliver long-term value. These stocks are rated an A (Strong Buy) in our proprietary rating system.
U.S. consumer price inflation eased to 4.9% year-on-year in April, its lowest annual pace since April 2021. Markets took the new data from the Labor Department earlier this month as a sign that the Federal Reserve’s efforts to curb inflation are finally bearing fruit. However, the Fed’s 2% inflation rate target is still away.
Moreover, the central bank has lifted rates ten times for a total of 5 percentage points since March 2022, taking the target fed funds rate to between 5% and 5.25%. While in the previous meeting, Fed Chairman Jerome Powell hinted that a pause in the hiking cycle is likely at the June meeting, some members of the FOMC committee still see the need for additional rises.
The New York Fed recession probability indicator suggests a 68.2% chance of a U.S. recession sometime in the next 12 months. That’s the highest reading in more than four decades. Other reliable economic indicators are flashing warning signs that the U.S. economy could soon be rolling over.
Take a look at the stocks mentioned above:
Limbach Holdings, Inc. (LMB)
LMB operates as an integrated building systems solutions company in the United States. It operates in two segments, General Contractor Relationships and Owner Direct Relationships.
LMB’s trailing-12-month asset turnover ratio of 1.79x is 124.4% higher than the 0.80x industry average. Its trailing-12-month return on total capital of 8.25% is 21.2% higher than the 6.81% industry average.
During the fiscal first quarter ended March 31, 2023, LMB revenue increased 5.4% year-over-year to $121.01 million. Its net income came in at $2.99 million, compared to a loss of $1.52 million in the previous-year quarter. Also, its earnings per common share came in at $0.27, compared to negative $0.15 in the previous-year quarter.
LMB’s EPS is expected to increase 87.5% year-over-year to $0.15 for the fiscal second quarter ending June 2023. The company’s revenue for the same quarter is expected to increase 2.3% year-over-year to $118.75 million. Also, it has surpassed EPS estimates in each of the trailing four quarters, which is impressive.
Shares of LMB have gained 280.8% over the past year to close the last trading session at $21.36.
LMB’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Growth and Quality and a B in Value and Sentiment. It is ranked #2 out of 80 in the B-rated Industrial - Services industry.
Beyond what is stated above, we’ve also rated LMB for Stability and Momentum. Get all LMB ratings here.
Nature’s Sunshine Products, Inc. (NATR)
NATR is a natural health and wellness company that manufactures and sells nutritional and personal care products in Asia, Europe, North America, Latin America, and internationally.
NATR’s trailing-12-month asset turnover ratio of 1.78x is 96.6% higher than the 0.90x industry average. Its trailing-12-month gross profit margin of 71.58% is 128.2% higher than the 31.36% industry average.
NATR’s net sales came in at $108.63 million in the fiscal first quarter that ended March 31, 2023. Its net income came in at $1.25 million, compared to a loss of $2.69 million in the previous-year quarter. Also, its net income per common share came in at $0.04, compared to negative $0.15 in the previous-year quarter.
Street expects NATR’s revenue for the fiscal second quarter ending June 2023 to come in at $103.50 million. Its EPS is expected to come in at $0.03 for the same quarter. Also, it has surpassed revenue estimates in each of the trailing four quarters.
The stock has gained 32.2% year-to-date to close the last trading session at $11.
NATR’s robust prospects are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
NATR has an A grade for Quality, Value, and Sentiment and a B in Stability. It is ranked first out of seven stocks in the A-rated Medical - Consumer Goods industry.
Click here for the additional POWR Ratings for NATR (Growth and Momentum).
LifeVantage Corporation (LFVN)
LFVN engages in the identification, research, development, formulation, sale, and distribution of nutrigenomic activators, dietary supplements, nootropics, pre- and pro-biotics, weight management, skin and hair care products, bath and body, and targeted relief products.
Its trailing-12-month asset turnover ratio of 3.02x is 234.2% higher than the 0.90x industry average. Its trailing-12-month gross profit ratio of 80.18% is 155.7% higher than the 31.36% industry average.
On May 4, the company declared a quarterly dividend of $0.04, payable on June 15, 2023. The company pays an annual dividend of $0.14, which translates to a yield of 3.07% at the current price level. It has a four-year average dividend yield of 0.49%.
LFVN’s net revenue increased 7.5% year-over-year to $53.74 million in the fiscal third quarter, which ended March 31, 2023. Gross profit increased 6.9% year-over-year to $43.12 million. Also, its net income per share came in at $0.08.
The stock has gained 37.4% over the past month to close the last trading session at $4.56.
LFVN’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
LFVN also has an A grade for Quality and Value and a B in Stability. It is ranked first out of 10 stocks in the A-rated Medical - Consumer Goods industry.
To access additional ratings for LFVN’s Growth, Sentiment, and Momentum, click here.
Discover 10 widely held stocks that our proprietary model shows have tremendous downside potential. Please make sure none of these “death trap” stocks are lurking in your portfolio:
LMB shares were trading at $21.36 per share on Monday afternoon, up $0.25 (+1.18%). Year-to-date, LMB has gained 105.19%, versus a 10.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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