- Three stocks that are down 50% or more over the last 12 months.
- Individually delivering growth, reliable returns or value.
- Can these three stocks build a market-beating portfolio?
In the book Moneyball by Michael Lewis later made into a movie starring Brad Pitt, the lead character attempts to produce a championship-winning baseball team on a tight budget.
With limited funds for recruitment, our hero goes about analysing and recruiting overlooked players with unique characteristics to be moulded into a team that can match the bigger-budget teams.
Of the stocks that have lost more than 50% in value over the last 12 months, here are three that might offer the prospective investor a winning combination, potentially turning your portfolio into a market-beating one:
- Top-line revenue growth
- Dependable shareholder returns
- Attractive value proposition
City Chic Collective Ltd ASX:CCX (CCX)
Growth
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Through to the end of the financial year (FY) 2021, top-line revenue growth for CCX is 33%. The stock has suffered of late as international inflation is accelerating the growth in the cost of goods sold (COGS), potentially hurting the market perception of future gross margins.
The projected annualised growth in marketing expenditure of an additional AUD$30m or 137% year-over-year is driving sales of approximately $130m or 50% growth. With inflation sending COGS up 65%, the forecast gross margin percentage is down slightly from 62% to 58% in 2022.
Expected net profit after tax excluding other income based upon the above calculations is in the region of AUD$45m-$55m, an improvement of 130% over the AUD$22m of 2021 – possibly closer to AUD$45m as inflation has accelerated in the second half of the FY.
Based upon these forecasts, the price to earnings for this stock on today’s market capitalisation of AUD$440m is nearer a multiple of 10, with revenue growth of 50% per annum.
All in all, it’s a stock with some very attractive international growth attributes and is expected to do well as the numbers are finalised late in the season for FY 2022.
Codan Ltd ASX:CCX (CDA)
Reliable
In the reliable column, we have Codan Ltd.
This stock is trading down in recent months again on the back of higher-anticipated COGS and overheads denting projected margins.
This is a stock that continues to deliver. The dividend payout as a percentage of net income is averaging close to 50% every year. There is solid top-line growth above 25% for the last three years and again for FY projections based upon the 2022 interim results.
High commodity prices should continue to support the resource sector CAPEX and CDA will ride that groundswell of demand.
There is a price earnings multiple of 13 at FY 2021 numbers and approximately 11 on forecast income of AUD$110m, based upon a conservative 2022 interim projection. Codan is a dependable dividend name to call upon.
Bravura Solutions Ltd ASX:BVS (BVS)
Value
In the value section, we find the fund management software player BVS.
The reported net assets of BVS in the FY 2021 financial statements were AUD$330m. The stock is currently trading on a market capitalisation of AUD$360m.
2021 revenues were down in 2020 and the stock has suffered as a result. The selling seems to be overdone given the moderate rebound in interim FY 2022 sales, solid dividend payout ratio of over 50% for the last four years, and a very reasonable earnings multiple of 10.
Round-up
If you’re in the market for bargains, then these three stocks are currently trading cheaply on the open market and might lift your portfolio game.
