The past year was challenging for the stock market as volatile market conditions troubled investors. However, with inflation showing signs of easing and the Fed signaling smaller interest rate hikes, now could be the opportune time to pick up fundamentally strong stocks Box, Inc. (BOX), Extreme Networks, Inc. (EXTR), and Core Molding Technologies, Inc. (CMT) for promising income this year.
The economy added higher-than-expected jobs in January, and inflation also rose on a sequential basis last month. Although inflation is on a downtrend, it is still far from the Fed’s long-term target. Minutes from the Fed’s policy meeting earlier this month show that the officials believe “ongoing” rate hikes would be necessary.
Rate hikes higher than the previously predicted range could lead to a recession. However, JPMorgan Chase & Co. (JPM) CEO Jamie Dimon believes that although uncertainties exist, a soft landing is still possible. Moreover, President Joe Biden said he believes that the U.S. economy will not fall into a recession this year or next year.
Given these factors, it could be wise for investors to buy fundamentally strong stocks BOX, EXTR, and CMT.
Box, Inc. (BOX)
BOX provides a cloud content management platform that enables organizations of various sizes to manage and share their content from anywhere on any device. The company's Software-as-a-Service platform allows users to collaborate on content, automate content-driven business processes, develop custom applications, and implement data protection, security, and compliance features.
In terms of the trailing-12-month gross profit margin, BOX’s 73.52% is 49.5% higher than the 49.18% industry average. Its 31.22% trailing-12-month levered FCF margin is 354.6% higher than the 6.87% industry average. Likewise, its 0.79x trailing-12-month asset turnover ratio is 27.9% higher than the industry average of 0.61x.
On October 19, 2022, BOX announced a renewed partnership with Japan’s Ministry of the Environment. Through this partnership, the Ministry of the Environment would digitize and streamline administrative operations, contributing to improved productivity, and better public services by transforming the work styles of employees.
It also strengthens the Ministry’s security posture and defense against serious issues such as internal fraud or information leaks.
For the fiscal third quarter that ended October 31, 2022, BOX’s revenue increased 11.6% year-over-year to $249.95 million. The company’s non-GAAP gross profit increased 14.3% year-over-year to $191.24 million.
Its non-GAAP net income attributable to common stockholders increased 31.8% year-over-year to $46.64 million. Moreover, its non-GAAP net EPS attributable to common stockholders increased 40.9% from the prior-year period to $0.31.
BOX’s EPS and revenue for the quarter that ended January 31, 2023, are expected to increase 42.6% and 9.9% year-over-year to $0.34 and $256.48 million, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 27.5% over the past nine months to close the last trading session at $33.68.
BOX’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #9 out of 81 stocks in the Technology - Services industry. In addition, it has an A grade for Growth and Quality. Click here to see the additional ratings of BOX for Value, Momentum, Stability, and Sentiment.
Extreme Networks, Inc. (EXTR)
EXTR provides software-driven networking solutions worldwide. It designs, develops, and manufactures wired and wireless network infrastructure equipment; and develops software for network management, policy, analytics, security, and access controls.
On February 8, 2023, EXTR announced that it had integrated network fabric capabilities into its ExtremeCloud SD-WAN platform, enabling customers to securely connect disparate environments such as the data center, campus, and branch locations from within a single platform.
In terms of the trailing-12-month gross profit margin, EXTR’s 56.28% is 14.4% higher than the 49.18% industry average. Its 4.13% trailing-12-month net income margin is 43.1% higher than the 2.89% industry average. Likewise, its 1.14x trailing-12-month asset turnover ratio is 85% higher than the industry average of 0.61x.
For the fiscal second quarter that ended December 31, 2022, EXTR’s total net revenues increased 13.3% year-over-year to $318.30 million. Its non-GAAP net income increased 28.5% year-over-year to $36.50 billion. Moreover, its non-GAAP EPS came in at $0.27, representing a 28.6% increase year-over-year.
Analysts expect EXTR’s EPS and revenue for the quarter ending March 31, 2023, to increase 23.1% and 11.9% year-over-year to $0.26 and $319.47 million, respectively. It has an impressive earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 100% to close the last trading session at $19.14.
It is no surprise that EXTR has an overall rating of A, which translates to Strong Buy in our proprietary rating system. It is ranked #2 out of 50 stocks in the B-rated Technology - Communication/Networking industry. It has an A grade for Growth and Quality.
We have also given EXTR grades for Value, Momentum, Stability, and Sentiment. Get all EXTR ratings here.
Core Molding Technologies, Inc. (CMT)
CMT operates as a molder of thermoplastic and thermoset structural products. The company offers a range of manufacturing processes, including compression molding of the sheet molding compound, resin transfer molding, liquid molding of dicyclopentadiene, spray-up, and hand-lay-up, direct long-fiber thermoplastics, and structural foam and structural web injection molding.
Its 1.91x trailing-12-month asset turnover ratio is 151.5% higher than the industry average of 0.76x.
For the fiscal third quarter that ended September 30, 2022, CMT’s revenues increased 25.4% year-over-year to $101.61 million. Its net income came in at $1.32 million, compared to a $3.31 million loss in the year-ago quarter.
Additionally, its adjusted EBITDA increased significantly year-over-year to $8.43 million, while its net EPS came in at $0.16, compared to a loss per share of $0.41 in the prior-year quarter.
CMT’s EPS for the fiscal year 2022 is expected to increase 87.3% year-over-year to $1.03. Its revenue for the fiscal year 2023 is expected to increase 1.4% year-over-year to $373.75 million. Over the past nine months, the stock has gained 59.2% to close the last trading session at $16.33.
CMT’s positive outlook is reflected in its POWR Ratings. The company has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. It is ranked #2 out of 36 stocks in the A-rated Industrial - Manufacturing industry. In addition, it has an A grade for Growth and Sentiment and a B for Value.
Click here to see the additional ratings of CMT for Momentum, Stability, and Quality.
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BOX shares were trading at $33.42 per share on Friday afternoon, down $0.26 (-0.77%). Year-to-date, BOX has gained 7.36%, versus a 3.42% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
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