The stock market has been volatile this year due to a variety of macroeconomic, geopolitical, POWR rating worries. Investor mood has been impacted by the Fed’s aggressive rate hikes to contain excessive inflation.
However, the rate hikes appear to be having an impact, as inflation fell marginally in October. Economists anticipate that November’s inflation figures will show further reduction.
The Fed’s officials have indicated that the Fed will reduce the magnitude of rate hikes this month and in the future. As a result, many experts predict a slight recession next year.
Economists predict the economy will end the fourth quarter on a high note, driven by consumer spending and business investment, according to the UCLA Anderson Forecast. According to Moody’s Analytics Chief Economist Mark Zandi, the US economy will narrowly avoid a recession since inflation is dropping and consumers are still spending.
Given this backdrop, investors may be advised to purchase fundamentally sound equities with great growth prospects, such as Cisco Systems, Inc. (CSCO – Get Rating) and Molina Healthcare, Inc. (MOH – Get Rating).
The Cisco Systems, Inc. (CSCO)
CSCO creates, manufactures, and distributes internet protocol-based networking and other products in networking, security, collaboration, apps, and cloud computing. The Americas, Europe, the Middle East, and Africa (EMEA), and Asia Pacific, Japan, and China are the company’s three geographic segments (APJC).
CSCO announced an expansion of its existing SD-WAN cooperation with Microsoft (MSFT) on October 5, 2022, to allow clients to bypass the public internet and MPLS by routing Cisco SD-WAN traffic over the latter’s Azure cloud backbone. This is projected to bring value by improving speed and lowering costs.
For the first quarter ending October 29, 2022, CSCO’s overall revenue climbed 5.7% year on year to $13.63 billion. Non-GAAP net income climbed 2.1% year on year to $3.55 billion. Its non-GAAP earnings per share were $0.86, a 4.9% rise year over year. Furthermore, non-GAAP operating income climbed 1.1% year on year to $4.33 billion.
CSCO’s 22% trailing-12-month net income margin is 582.7% larger than the 3.22% industry average. Similarly, their trailing-12-month EBIT margin of 26.97% is 307.3% higher than the industry average of 6.62%. In addition, the stock’s trailing 12-month levered FCF margin of 20.23% is 170.4% greater than the industry average of 7.48%.
Analysts estimate CSCO’s earnings per share and revenue to climb 1.8% and 5.4% year on year to $0.86 and $13.41 billion, respectively, for the fiscal quarter ending January 31, 2022. In each of the previous four quarters, it outperformed Street EPS projections. The stock has risen 10.1% in the last month, closing the most recent trading session at $49.30.
The excellent fundamentals of CSCO are reflected in its POWR Ratings. In our proprietary grading system, the stock gets an overall A grade, which equates to a Strong Buy. The POWR Ratings are determined by taking into account 118 different factors, each of which is weighted to an optimal degree.
It receives an A for Quality and a B for Stability. It is ranked #3 in the Technology – Communication/Networking industry out of 48 stocks. CSCO’s other ratings for Growth, Value, Momentum, and Sentiment may be found here.
Molina Healthcare Corporation (MOH)
MOH provides managed healthcare services through Medicaid, Medicare, and state insurance exchanges. The business is divided into four divisions: Medicaid, Medicare, the Marketplace, and Other.
MOH announced the completion of its acquisition of AgeWell New York’s Medicaid Managed Long-Term Care (MLTC) business on October 3, 2022. AgeWell’s MLTC business serves over 13,000 members as of September 30, 2022. This is expected to benefit the MOH’s bottom line.
MOH’s total sales climbed 12.6% year on year to $7.93 billion in the fiscal third quarter ending September 30, 2022. The company’s operational income climbed 51.6% year on year to $335 million. Adjusted net income climbed 54.9% year on year to $254 million. Furthermore, their adjusted EPS was $4.36, showing a 54.1% rise year over year.
MOH’s 2.77% trailing-12-month net income margin compares to the negative industry average. Similarly, their trailing-12-month EBITDA margin of 4.76% is 27.6% greater than the industry average of 3.73%. In addition, the stock’s trailing-12-month asset turnover ratio of 2.54% is 642.5% greater than the industry average of 0.34%.
MOH’s EPS and revenue are predicted to climb 40% and 6.2% year on year to $4.03 and $7.87 billion, respectively, for the quarter ending December 31, 2022. In each of the previous four quarters, it outperformed consensus EPS projections. The stock has gained 27.7% in the last six months, closing the most recent trading session at $353.06.
The POWR Ratings show MOH’s promising potential. In our proprietary grading system, the stock gets an overall grade of A, which corresponds to a Strong Buy.
It received a B for Growth, Value, and Quality. It is ranked #4 out of 11 stocks in the A-rated Medical – Health Insurance industry. Other MOH ratings for Momentum, Stability, and Sentiment can be found here.
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