Ticker Reports for November 14th
3 GARP Stocks Offering Strong Growth: Aptiv, Allstate, Barrick
A key to determining this is using the PEG ratio. The PEG ratio divides a stock’s forward price-to-earnings (P/E) ratio by its projected earnings growth rate. A number under 1 means the market is paying less per expected dollar of earnings than the projected growth rate suggests it should. Based on this, there is reason to believe the stock is undervalued. Other metrics to consider are the company's P/E ratio versus its industry, a strong return on equity (ROE), and projected earnings growth.
Here are three companies that score well based on these criteria to consider.
1. Aptiv: Auto-Parts Company with Strong Upside Potential
Aptiv PLC (NYSE: APTV) is a maker of automotive components like connectors, housings, and wiring assemblies that let different vehicle parts interact. Aptiv's stock price has been sliding for three years despite growing its revenue by 10% annually over the period. Going forward, its revenues are not expected to grow quickly, but its earnings are.
Projections show earnings increasing by over 16% in both 2025 and 2026. Despite this, it is trading at a forward P/E ratio of just 8.2x, which is below the industry median. Yet analysts project that earnings growth will be the second highest among Aptiv's eight competitors. This results in the company trading at a PEG ratio of just 0.6. Its ROE of 24% also ranks second in the group.
Despite the stock's slide and falling price targets, analysts still see solid upside. The company’s 12-month price target of over $78 implies a 40% upside. However, one issue to watch out for with Aptiv is its excessive debt of over $10 billion. Fitch Ratings places a BBB credit rating on the firm, which indicates that its credit quality is good, but not great.
2. Allstate: Insurance May Be Boring, but This Earnings Growth is Not
Allstate Insurance (NYSE: ALL) currently fits into the description of a GARP stock. The financial stock is up by a very nice 43% in 2024, but still appears to be trading cheaply compared to its projected earnings growth. The company’s adjusted earnings per share (EPS) are forecast to grow 18% and 11% in 2025 and 2026, respectively. However, its forward P/E ratio is just 11x, slightly below the middle of its industry. Additionally, its ROE is in the top 25% of its industry. Currently, its PEG ratio is less than 0.1.
Analysts are projecting increased profitability in the non-life US insurance industry. Combined ratios are coming down from their elevated 2023 levels. The combined ratio measures what percentage of the premiums an insurance company receives that it must pay out in claims. A combined ratio above 100% suggests it is losing money on its underwriting. Deloitte says that slowing inflation should help stem the increase in the cost of claims.
3. Barrick: Gold Miner Improving Production Issues at Key Facility
Traditionally, Barrick Gold (NYSE: GOLD) would not be considered in a GARP discussion. However, the strong uptick in the price of gold changes that—at least for now. In 2024, gold futures are up 25%, tied for their best calendar year return since 2010. If the company’s Q4 earnings come in as expected, its adjusted EPS will have risen by 46% in the year. Analysts are expecting that growth to accelerate further in 2025 to 49%. In 2025, analysts expect revenue growth to hit the highest level in four years. With just a 9x forward P/E ratio, the company’s PEG ratio is just 0.3, one of the lowest in the metals and mining industry.
Barrick stock really hasn’t been able to capitalize on the rising gold price this year due to issues with its production. The company’s massive new mine expansion of the Pueblo Viejo mine started off slow, but things are improving. Production increased by 23% from Q2 2024 to Q3. The average analyst price target implies a 42% upside in the stock.
Gold Surge Sparks Fears: Is Your IRA Prepared?
Welcome to the financial rollercoaster of 2024, where inflation is persistent, stock markets are overinflated and volatile, global conflicts are intensifying, and the national debt is reaching new heights.
These challenges aren't distant headlines; they're impacting your everyday finances.
Mouse Rising: The Iger Investment Pays Off for Disney Investors
As controversial and emotionally charged as Iger’s return was for the market, it is a move paying off for investors at Walt Disney (NYSE: DIS). His return keeps the company on track to sustain long-term growth, healthy cash flows, and increasing capital returns while delivering value to its consumers. The results from Q3 are a testament to his efforts, including optimizing the streaming business. Streaming and entertainment were the driving forces of growth in FQ4, but strengths were seen across the board, including widening the total system margin.
The critical detail is that the company outperformed, accelerated its growth, and provided robust guidance forecasting double-digit earnings growth for the next three years underpinned by streaming and sports. That puts the stock at quite a value, trading at only 15.5X the low end of projections, with dividends, share buybacks, and distribution growth also in the picture.
The company’s dividend is worth about 0.80% in annualized return with shares near $100, which is not a large figure but is forecasted to grow in alignment with adjusted earnings, so at least 10% annually. The share repurchases are more substantial, reducing the share count by 1% in F2024 and $3 billion targeted for 2025, about 1.6% of the market cap going into the release.
Disney’s Exceeds Targets: Raises Guidance for 2025
Disney had a solid quarter in FQ4, with growth in the core entertainment and experiences segments offsetting weakness in the sports segment. Total revenue is up 6.3% compared to the prior year, outpacing the consensus estimate by a slim margin and accelerating from the prior quarter and year. Entertainment is where the results shined. The entertainment segment grew by 14%, with leverage resulting in operating income. Within Sports, green shoots were seen in the Domestic ESPN ad business, up 7%, and Experiences grew by 1% to set records for revenue and income.
Total segment income is another area of strength in Q3 and moving forward. The company grew its total segment operating income by 23% for the quarter and 21% for the year, with additional gains expected in coming quarters. Critical details from the earnings results are that free cash flow is up 18%, more than triple the top-line growth, and the GAAP and adjusted earnings growth was strong. GAAP earnings grew by nearly 80%, while the adjusted $1.14 is up 39% and nearly 300 bps better than the consensus reported by MarketBeat.
The balance sheet highlights are favorable to shareholders. Business activities reduced the cash, current, and total assets while also reducing the borrowings, long-term liabilities and total liability. The net result is a 1.4% increase in equity and an expectation for the cash balance to begin growing as soon as FQ1 2025. Regarding the balance sheet health, debt, including current and long-term borrowing and other liabilities, is less than 0.5X equity, raising no red flags for investors.
Analysts See Disney Advancing Another 10%
The analysts show a high conviction in the consensus Moderate Buy rating, with 82% of the twenty-two tracked by MarketBeat rating at Buy or higher. They also show a high conviction in the consensus price target, which is up compared to last year but holding steady compared to last month and last quarter. The consensus is near $119 or about 6% above the post-release price action and a critical pivot point with the high-end range another $20 or 17% higher. The Q3 results are unlikely to alter the trend and are likely to strengthen it, so investors may expect to see upgrades and price target increases over the coming weeks and months.
The price action in Disney stock is bullish. It rose nearly 10% following the release to trade above a critical resistance point near $110.50, coinciding with price peaks and resistance in 2022 and 2023. If the market can sustain support at this level, the odds are high that it will continue higher. The next critical targets for technical resistance are near $115 and $120, and if broken, they will lead to a much larger advance.
"This Changes Everything" - Trump Hands Millions Massive IRS Gift
Now it's your time to return the favor by taking advantage of this tax "revenge loophole."
Because even as we wait for Trump's agenda to kick in…
Can CAVA Stock Be the Next Chipotle? Earnings Can Help
Some stocks seem under the radar in some of the most underrated sectors in the market, such as retail stocks, in a world where technology stocks and artificial intelligence are all the hype. One success story in the restaurant industry is Chipotle Mexican Grill Inc. (NYSE: CMG), after the stock compounded by over 700% in the past decade to leave the broader S&P 500 behind.
How could a restaurant chain do so well in the market? Can any other brand attempt to replicate its success in today’s landscape? Those are the questions that a new contender is looking to answer. That contender is CAVA Group Inc. (NYSE: CAVA), the newer build-and-go restaurant concept making a splash in the market and on investor screens today.
As the stock has already rallied by over 369% in the past 12 months, some may be wary of even considering it near its highs. However, today, that story and sentiment might change. While whether the company can overtake Chipotle in its own game is still up for debate, CAVA’s latest quarterly earnings results show one decisive trend for the stock ahead.
Why CAVA’s Growth Could Be Key for Investors to Thrive Over the Next Decade
There are reasons to believe that the next decade will be a “lost” one for the S&P 500. At least, that’s what Warren Buffett and Goldman Sachs are calling for in their most recent projections and assessments. This means that there will be little to no growth in the coming years, so investors need to get picky.
This is why investing in high-growth companies will be a key factor for success under this scenario and where CAVA beats Chipotle. Whether recent growth is enough to let CAVA’s $16.8 billion market capitalization catch up to Chipotle’s $80.7 billion is yet to be known. Still, one thing is sure: double-digit growth might eventually be achieved.
CAVA’s latest quarterly earnings results show growth potential, with revenues growing by as much as 39% on the year compared to Chipotle’s 13% growth rate for the same period.
To deliver, and most importantly, to keep delivering, these growth rates, CAVA needs to have enough capacity to back projections. The 11 new CAVA restaurant openings during the quarter alone took care of this, all operating at a restaurant-level profit margin of 25.6% despite not having the scale that Chipotle counts on.
On the other hand, Chipotle’s restaurant-level margins declined to 25.5%, giving investors second thoughts about whether Chipotle can remain the leader in this business model compared to CAVA. The tie-breaker and the answer to this question might come from one of the most common KPIs for the retail sector.
Comparable sales metrics, which measure sales growth excluding the addition of new locations, were up by 18.1% on the year while only pushing as little as 6% for Chipotle during the same period. Ultimately, CAVA’s free cash flow holds the key to future upside, as the company recorded quarterly profitability.
Posting up to $23.3 million of free cash flow for the quarter compares to the negative outflow of $9.1 million a year prior. Such a jump does justify the triple-digit rallies that CAVA pulled off over the past 12 months. However, this is only half the equation; now, investors need to check on Wall Street’s side of the equation to figure out where the next steps are.
Wall Street’s Bullish Take on CAVA Stock Signals More Upside Ahead
Even as the stock already trades at 85% of its 52-week high, Wall Street analysts are still willing to price the company higher moving forward. Especially those at Stifel Nicolaus recently reiterated their “Buy” rating on the company, boosting their valuations up to $175 a share.
To prove these new valuations and views right, CAVA stock would need to rally by as much as 20% from where it trades today, not to mention a new high price for the year. Backing these valuations is the earnings per share (EPS) growth forecast for the next 12 months, which now expects to see up to $0.24 in earnings.
This implication would call for a near doubling in CAVA’s EPS compared to today's $0.15, which should eventually cause the stock price to pull off a similar rate increase. Bearish traders seem to accept that the upside potential is too solidified for CAVA stock today, as the company’s short interest declined by 3.7% over the past month alone.
Bearish capitulation is coupled with institutional buying, and that’s typically a very strong signal for investors to keep in mind when justifying their bullish views on a stock. Today, those at FMR LLC decided to boost their CAVA positions by 0.9% as of November 2024, bringing their net holdings to a high of $431.6 million, or 3.1% ownership in the company.
All of the tailwinds are there, and superior growth could lead to further buying of CAVA stock in the coming years, especially as all the factors are aligned for it to pull off new rallies.
MarketBeat Media, LLC dba TickerReport
345 N Reid Place, Suite 620, Sioux Falls, SD 57103.
0 Response to "🌟 Can CAVA Stock Be the Next Chipotle? Earnings Can Help"
Post a Comment