Impressive third-quarter corporate earnings, declining jobless claims, and the potential passage of a jumbo infrastructure spending bill in the near term have fostered an uptrend in the stock market of late. Consequently, several stocks are trading at high price levels now.
However, investors’ concerns over the continuing spread of COVID-19, supply chain disruptions, and rising inflation could lead to a market correction in the near term in which many high-priced stocks may lose value.
Therefore, we think fundamentally-sound stocks Mitsubishi UFJ Financial Group, Inc. (MUFG), Petróleo Brasileiro S.A. (PBR), UBS Group AG (UBS), and Summer Infant, Inc. (SUMR), which are each currently trading at less than $20, could be solid bets now.
Mitsubishi UFJ Financial Group, Inc. (MUFG)
Headquartered in Tokyo, Japan, MUFG is a bank holding company that offers financial services internationally. It also provides financing, syndication loans, hedging, money market products, liability management services, and other related services.
On October 6, MUFG’s core banking subsidiary MUFG Bank, along with MUFG Innovation Partners (MUIP), Bank of Ayudhya (Krungsri), and Krungsri Finnovate (KFIN), signed a memorandum of understanding (MoU) with the Digital Economy Promotion Agency (DEPA) of the Kingdom of Thailand, to support start-up companies in the digital transformation field in Japan and Thailand. MUFG Bank and Krungsri created a platform to provide high added-value financial services in Japan and Thailand. This initiative should enable MUFG and its partners to contribute to both countries’ economic and industrial development.
On September 27, 2021, MUFG developed the MUFG Wealth Management Digital Platform (WMPF) to offer optimal solutions to high net-worth customers. Scheduled to be deployed in the second half of fiscal 2021 across all its subsidiaries, MUFG will work to understand the life goals of its customers and leverage its comprehensive strengths to utilize the company’s total assets to propose optimal solutions for various needs.
For its fiscal first quarter, ended June 30, 2021, MUFG’s ordinary profits increased 65.7% year-over-year to ¥460.32 billion ($4.05 billion). The company’s pre-tax income came in at ¥496.77 billion ($4.37 billion), indicating an 88.3% year-over-year improvement. Its net profit was ¥383.08 billion ($3.37 billion), up 108.8% from the prior-year period. Its EPS increased 108.8% year-over-year to ¥29.75.
A $0.65 consensus EPS estimate for the current year indicates a 16.7% rise from the prior-year period. It surpassed the Street’s revenue estimates in three of the trailing four quarters. Over the past six months, the stock has gained 3.5% in price and closed yesterday’s trading session at $5.58.
MUFG’s 1.67x trailing-12-month Price/Sales is 49.1% lower than the 3.28x industry average. In terms of trailing-12-month Price/Book, MUFG is currently trading at 0.45x, which is 63.9% lower than the 1.25x industry average.
MUFG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Petróleo Brasileiro S.A. (PBR)
Headquartered in Rio de Janeiro, Brazil, PBR drills for, refines, processes, trades, and transports crude oil from producing onshore and offshore oil fields and from shale or other rocks and supplies oil products, natural gas, and other liquid hydrocarbons internationally. The company operates through three segments—Exploration and Production; Refining, Transportation and Marketing; and Gas and Power. It operates oil tankers, distribution pipelines, marine, river and lake terminals, thermal power plants, fertilizer plants, and petrochemical units.
On September 20, 2021, as part of the strategy of the member companies of the Oil and Gas Climate Initiative (OGCI), PBR announced its desire to achieve net-zero greenhouse gas emissions from operations under its control and its intention to leverage its influence to achieve this in non-operated assets. This reflects the company’s efforts to contribute to the Paris Agreement and maintain its competitiveness as a low-cost, low-carbon producer.
PBR’s sales revenues for its fiscal third quarter, ended September 30, 2021, came in at $23.26 billion, representing a 76.9% rise from the prior-year period. The company’s gross profit was $11.39 billion, up 81.4% from the prior-year period. Its operating income came in at $12.39 billion, indicating a 251.1% increase from the year-ago period. Its net income was $5.95 billion, compared to a $257 million loss in the prior-year period. Its EPS was $0.46, versus a $0.02 loss per share in the year-ago period. As of September 30, 2021, the company had $10.93 billion in cash and cash equivalents.
A $1.70 consensus EPS estimate for the current year represents a 325% rise from the prior-year period. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Analysts expect PBR’s revenue to be $76.43 billion for the current year, representing a 44.8% rise from the prior-year period. Over the past six months, PBR gained 20% in price and ended yesterday’s trading session at $10.56.
In terms of forward EV/Sales, PBR’s 1.54x is 40.2% lower than the 2.58x industry average. In terms of forward EV/EBITDA, PBR is currently trading at 3.07x, which is 61.5% lower than the 7.99x industry average.
PBR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The stock has an A grade for Momentum and Quality, and a B grade for Growth and Value.
PBR is ranked #15 of 49 stocks in the A-rated Foreign Oil & Gas industry.
UBS Group AG (UBS)
UBS is a Switzerland-based company that provides financial advice and solutions to private, institutional, and corporate clients worldwide. The company operates through four divisions: Global Wealth Management; Personal & Corporate Banking; Asset Management; and Investment Bank. It also offers securities services, such as fund administration and third-party fund management.
On August 10, 2021, UBS and Sumitomo Mitsui Trust Holdings’ (SMTH) wealth management alliance, UBS SuMi TRUST Wealth Management Co., Ltd., launched operations in Tokyo, Osaka, and Nagoya. The new company is the first in Japan to offer global securities and wealth management services together with a Japanese trust banking group’s custody, real estate, inheritance, and wealth transfer expertise. Both companies are looking forward to delivering a uniquely broad and relevant portfolio of benefits to high-net-worth and ultra-high net worth clients in Japan.
For its fiscal third quarter, ended September 30, 2021, UBS’ operating income increased 2.2% year-over-year to $9.13 billion. The company’s pre-tax operating profit came in at $2.87 billion, up 11.1% from the prior-year period. While its net earnings increased 8.9% year-over-year to $2.28 billion, its EPS increased 12.5% year-over-year to $0.63. The company had $190.97 billion in cash and cash equivalents as of September 30, 2021.
Analysts expect the stock’s revenue to improve 6.4% year-over-year in the current year to $34.46 billion. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past six months, UBS has gained 16.9% and ended yesterday’s trading session at $18.18.
UBS’ 1.75x forward Price/Sales is 48.7% lower than the 3.41x industry average. In terms of forward Price/Book, UBS is currently trading at 1.09x, which is 10.7% lower than the 1.22x industry average.
It’s no surprise that UBS has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Sentiment, Value, and Stability.
UBS is ranked #11 of 96 stocks in the B-rated Foreign Banks industry.
Summer Infant, Inc. (SUMR)
SUMR designs, markets, and distributes branded juvenile health, safety, and wellness products worldwide. The company sells its products directly to retailers through its websites, direct sales force, a network of independent manufacturers’ representatives and distributors, and retail customers.
ACN’s adjusted net income came in at $1.93 billion for the second quarter, ended July 3, 2021, up 6.2% from the prior-year period. Its adjusted EPS increased 3.5% year-over-year to $0.89. As of July 3, 2021, SUMR had $457,000 in cash and cash equivalents. Over the past month, the stock has rallied 4.7% in price and ended yesterday’s trading session at $8.04.
In terms of trailing-12-month EV/Sales, SUMR is currently trading at 0.42x, which is 79.5% lower than the 2.03x industry average. In terms of trailing-12-month EV/EBITDA, SUMR is currently trading at 9.84x, which is 20.7% lower than the 12.40x industry average.
SUMR’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary rating system. The stock also has a B grade for Growth and Value.
SUMR is ranked #8 of 73 stocks in the Consumer Goods industry.
