The growing concerns over a potential recession amid tighter monetary policies and ongoing geopolitical tensions have kept the stock market under immense pressure lately. Goldman Sachs predicted a 30% chance of the U.S. economy sliding into a recession over the next year, up from the prior forecast of 15%.
However, the massive market correction has created great buying opportunities for investors, as several fundamentally sound stocks are currently trading at attractive valuations. Given their robust financials, healthy cash flows, and reliable growth attributes, these stocks are expected to rebound soon.
Fundamentally-sound stocks Korn Ferry (KFY), Tennant Company (TNC), and Good Times Restaurants Inc. (GTIM) have lost more than 25% year-to-date. So, it could be wise to invest in them now.
Korn Ferry (KFY)
KFY provides organizational services worldwide. The company operates through four segments: Consulting; Digital; Executive Search; and RPO (Recruitment Process Outsourcing) & Professional Search. It offers executive search services to fill executive-level positions. In addition, it provides RPO, project recruitment, professional search, and outsourcing recruiting solutions.
On May 10, KFY expanded its digital presence in India with a new software product development center in Bangalore. The center will accelerate the company’s digital cloud strategy and its Intelligence Cloud suite.
On April 2, KFY acquired Patina Solutions Group, Inc. Through this acquisition, Patina’s substantial interim executive solutions expertise across multiple industry verticals is brought to KFY.
“This combination presents a real, tangible opportunity for Korn Ferry and our clients looking for the right talent, who are highly agile, with specialized skills and expertise, to help them drive superior performance, including on an interim basis. Patina offers ideal solutions for today’s nomadic labor market,” said KFY’s CEO, Gary D. Burnison.
In the fiscal 2022 fourth quarter ended April 30, 2022, KFY's total revenue increased 30.4% year-over-year to $727 million. Its adjusted EBITDA rose 28% year-over-year to $144.4 million. In addition, the company's adjusted net income attributable to KFY and adjusted earnings per share came in at $94.40 million and $1.75, registering an increase of 42.6% and 44.6% from the prior-year period, respectively.
The $687.62 million consensus revenue estimate for the fiscal 2022 second quarter, ending July 2022, represents a 17.5% improvement from the same period in 2021. Analysts expect KFY’s EPS for the same quarter to increase 6.3% year-over-year to $1.46. The company has topped the consensus revenue and EPS estimates in each of the trailing four quarters.
The stock has lost 25.2% year-to-date to close yesterday’s trading session at $56.63.
KFY's POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
KFY has a grade of B for Value, Sentiment, and Quality. Within the A-rated Outsourcing - Staffing Services industry, it is ranked #5 of 18 stocks.
Click here to access additional POWR Ratings (Stability, Growth, and Momentum) for KFY.
Tennant Company (TNC)
TNC designs, manufactures, and markets floor cleaning equipment in the Americas, Europe, the Middle East, Africa, and the Asia Pacific. The company offers its products under the Tennant, Nobles, Alfa Uma Empresa Tennant, Gaomei, and Rongen brands. TNC’s products are used in retail and distribution centers, factories, warehouses, and public venues.
On April 5, TNC introduced lithium-ion technology to their portfolio of AMR machines, including the T380AMR, T7AMR, and T16AMR. “With longer run times and hassle-free maintenance, lithium-ion powered robotic scrubbers will help our customers increase their cleaning efficiency and optimize employee resources even more,” said Barb Balinski, TNC’s Senior Vice President, Innovation and Technology.
TNC's net sales in the Americas increased 1.6% year-over-year to $160.30 million in the fiscal 2022 first quarter ended March 31, 2022. The company’s cash, cash equivalents, and restricted cash amounted to $110.40 million, and its current assets came in at $524.80 million as of March 31, 2022.
The consensus revenue estimate of $309.20 million for the fiscal 2022 fourth quarter, ending December 2022, represents an increase of 11.9% from the prior-year period. The $1.41 consensus EPS estimate for the same quarter indicates a 98.6% year-over-year rise. Furthermore, it has surpassed the consensus EPS estimates in three of the trailing four quarters.
TNC’s shares have declined 28.9% year-to-date and closed the last trading session at $57.64.
TNC's POWR Ratings reflect a strong outlook. The stock has an overall rating of A, which translates to a Strong Buy in our POWR Ratings system.
TNC has a grade of B for Stability, Quality, and Value. It is ranked #2 of 78 stocks in the B-rated Industrial - Machinery industry.
Click here to access TNC's POWR Ratings for Sentiment, Growth, and Momentum.
Good Times Restaurants Inc. (GTIM)
GTIM engages in the restaurant business in the U.S. The company operates and franchises Good Times Burgers & Frozen Custard, an upscale drive-through dining restaurant, and Bad Daddy’s Burger Bar, a full-service upscale casual dining restaurant. It operates, franchises, or licenses more than 42 Bad Daddy’s Burger Bar restaurants and 32 Good Times Burgers & Frozen Custard restaurants.
In February, GTIM commenced a share repurchase program. The company’s Board of Directors authorized repurchases of up to $5,000,000. “This announcement demonstrates our confidence in both of our brands and the growth opportunities we see over the long term,” said Ryan Zink, GTIM’s CEO.
“This share repurchase program will return capital to shareholders while providing a secondary use for cash generated by the business while we continue to reinvest in both existing restaurants at both brands and execute a disciplined growth program for Bad Daddy’s,” he added.
In the fiscal 2022 first quarter ended March 29, 2022, GTIM's net revenues increased 15.1% year-over-year to $33.60 million, while its restaurant sales grew 15.1% year-over-year to $33.36 million. As of March 29, 2022, the company's cash and cash equivalents and current assets came in at $7.07 million and $11.68 million, respectively.
Analysts expect GTIM’s EPS to grow at a 30% CAGR over the next five years. The stock has slumped 36.9% year-to-date to close the last trading session at $2.74.
GTIM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall grade of A, equating to a Strong Buy in our proprietary rating system.
GTIM has a grade of A for Value. It has a B grade for Growth, Momentum, Quality, and Sentiment. Within the A-rated Restaurants industry, it is ranked #1 of 47 stocks.
To see additional POWR Ratings (Stability) for GTIM, click here.
KFY shares were trading at $55.71 per share on Thursday afternoon, down $0.92 (-1.62%). Year-to-date, KFY has declined -26.16%, versus a -20.60% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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