Three Stocks Near Their 52-Week Lows Worth Considering
When stocks hit these lows, it often presents a unique buying opportunity. Let’s explore these companies and what their numbers say about potential future performance.
Today, I want to dive into three stocks that are currently trading near their 52-week lows. When stocks hit these lows, it often presents a unique buying opportunity. Let’s explore these companies and what their numbers say about potential future performance.
1. UPS (United Parcel Service)
First up is UPS, currently priced at $128. As a shipping company, UPS has always been one of my favorites, along with the U.S. Postal Service. FedEx? Not so much—sorry, FedEx fans!
The Numbers
UPS has a market cap of $110 billion and an enterprise value of $156 billion. This discrepancy highlights the company's substantial debt, which isn't uncommon for a capital-intensive business like shipping. They have a fleet of trucks, planes, and warehouses to maintain, so a bit of debt in this sector isn't alarming.
- Free Cash Flow: Average over the last five years is about $8 billion.
- Net Income: Just slightly higher than free cash flow, which is something to keep an eye on.
- Return on Invested Capital: Surprisingly strong, showing they reinvest their profits efficiently.
However, one concern is the profit margins. The five-year average profit margin stands at 8%, but it’s declined to just under 6% in the trailing twelve months. This drop could indicate a return to pre-pandemic shipping patterns, as people ship less now that they can meet face-to-face.
Stock Analysis
Using the stock analyzer tool, I looked at UPS’s revenue growth. Historically, they’ve seen growth just under 5%, but given current trends, I’m conservatively estimating a 3% growth rate moving forward. Setting a price-to-earnings (P/E) ratio of 20 gives an intrinsic value of about $97 per share. Buying now could yield a return of around 6.29%. For me, a watch list price of $95 would be ideal to start exploring potential investments.
2. Occidental Petroleum (OXY)
Next, let’s talk about Occidental Petroleum, currently priced at $52.79. This is a significant player in the oil industry, with Warren Buffett owning about 255 million shares, valued at around $13.2 billion.
The Numbers
Occidental has a market cap of $38 billion and an enterprise value of $92.5 billion, indicating a hefty amount of debt. This debt isn’t surprising in the oil sector; it's crucial to assess its implications thoroughly.
- Free Cash Flow: Strong and impressive.
- Net Income: Also robust, consistently outperforming free cash flow.
- Return on Invested Capital: About 6%, but this number can be skewed in the oil industry due to various external factors.
Stock Analysis
Examining the stock analyzer, I initially considered a 6% revenue growth rate moving forward. With oil prices being volatile, predicting future growth can be tricky, but I feel a profit margin of 11% is reasonable given the current market dynamics. Using a P/E of 15 gives an intrinsic value around $56.60. This means if you buy today, you could expect a return of just over 10%. I’d suggest a watch list price of $52 for potential entry.
3. Boeing (BA)
Lastly, we have Boeing, trading at $154 with a 52-week low of $151. This company has been on a rollercoaster ride, especially with the challenges faced during and post-COVID.
The Numbers
Boeing's market cap is $95 billion, while the enterprise value stands at a staggering $243 billion due to its significant debt load.
- Free Cash Flow and Net Income: These figures have been quite volatile and have suffered since 2019.
- Return on Invested Capital: This has been weak, making Boeing a risky play.
Stock Analysis
Given the current situation, I’m considering a 0% revenue growth rate over the next few years, gradually moving to 3% growth long-term. The profit margins have been dismal, so I’ll set them at 2.5%. Using a P/E of 18, I found that buying at the current price might lead to a negative return. Therefore, I’m eyeing a watch list price of $75 to see if it hits that level before making a move.
Final Thoughts
Each of these stocks presents its own set of challenges and opportunities. Whether it's UPS’s steady shipping business, Occidental’s exposure to volatile oil prices, or Boeing’s turbulent recovery, there’s plenty to consider.
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