Soaring fears of an economic slump had triggered market volatilities, which could linger for a while. Given such uncertainties, let us explore Ameresco, Inc. (AMRC), Arqit Quantum Inc. (ARQQ), and Better Therapeutics, Inc. (BTTX), with poor quality ratings in our proprietary POWR Ratings system.
Even though the inflation eased to 5% in March 2023, it is still way too high than the Fed’s target of 2%. There are anticipations of further interest rate hikes to fulfill the target of taming the sticky inflation. Cleveland Fed President Loretta Mester believes that interest rates need to rise above 5% due to persistent inflation.
However, experts believe that coupled with the credit crunch brought in by the financial system chaos, such monetary policy tightening could have an excruciating effect on the economy. The shortage of credit availability, coupled with rate hikes and geopolitical concerns, is feared to trigger a recession.
Moreover, the Conference Board Leading Economic Index (LEI) for the United States fell by 1.2% in March 2023 to 108.4, following a decline of 0.5 percent in February. The LEI is down 4.5% over the six-month period between September 2022 and March 2023.
Conference Board expects economic weakness to intensify and spread more widely throughout the U.S. economy over the coming months, leading to a recession starting in mid-2023.
Grappling with significant market volatility, low-quality stocks AMRC, ARQQ, and BTTX could be best avoided now.
Ameresco, Inc. (AMRC)
AMRC is a clean technology integrator that provides a portfolio of energy efficiency and renewable energy supply solutions in the United States, Canada, and internationally. The company operates through U.S. Regions; U.S. Federal; Canada; and Alternative Fuels segments.
AMRC’s trailing-12-month gross profit margin of 15.94% is 46.8% lower than the industry average of 29.94%. Its trailing-12-month ROCE, ROTC, and ROTA of 12.41%, 4.08%, and 3.30% are 10.3%, 42.1%, and 36.6% lower than the industry averages of 13.84%, 7.05%, and 5.20%, respectively.
In terms of forward EV/EBITDA and non-GAAP P/E, AMRC is trading at 17.52x and 24.66x, 65.9% and 47.5% higher than the 10.56x and 16.72x industry averages, respectively.
For the fiscal fourth quarter that ended December 31, 2022, AMRC’s revenues declined 20.2% year-over-year to $331.73 million. Also, its net income attributable to common shareholders and net income per share decreased 36.4% and 35.8% from the prior-year quarter to $17.94 million and $0.34, respectively.
Its total current liabilities stood at $812.07 million compared to $474.22 million for the prior-year period that ended December 31, 2021.
Analysts expect AMRC’s revenue to plunge 42% to $334.84 million for the fiscal second quarter ending June 2023. For the same quarter, its EPS is expected to decline 43.2% year-over-year to $0.35.
The stock has declined 22.2% over the past year and 20.8% over the past six months to close its last trading session at $43.76.
AMRC’s weak outlook is reflected in its POWR Ratings. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
AMRC is also rated an F for Quality and a D for Growth, Value, Stability, and Sentiment. It is ranked last within the 43-stock Energy - Services industry.
One can see the additional rating for Momentum for AMRC here.
Arqit Quantum Inc. (ARQQ)
Based in London, the United Kingdom, ARQQ provides cybersecurity services through satellite and terrestrial platforms. It offers QuantumCloud, a Platform-as-a-Service, and provides maintenance and support, and professional services.
ARQQ’s trailing-12-month ROTC of negative 122.28% compares to the industry average of 1.97%. Its trailing-12-month asset turnover ratio of 0.06x is 90% lower than the industry average of 0.61x.
In terms of trailing-12-month EV/Sales and Price/Sales, ARQQ is trading at 16.04x and 19.66x, which are 475.9% and 602.3% higher than the 2.78x and 2.80x industry averages, respectively.
For the fiscal year that ended September 30, 2022, ARQQ’s operating loss came in at $52.10 million. Its net cash used in investing activities came in at $24.43 million compared to $9.31 million for the year-ago period. Its total current assets stood at $56.64 million compared to $90.26 million in the prior-year period that ended September 30, 2021.
Analysts expect ARQQ’s EPS to decline 86.3% year-over-year to $0.07 for the fiscal year ending September 2023. Its revenue is expected to come in at $78.47 million for the same period.
The stock has declined 88% over the past year and 72% over the past six months to close its last trading session at $1.12.
ARQQ’s POWR Ratings reflect its bleak prospects. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
ARQQ is rated a D for Stability and an F for Growth and Quality. It is ranked last within the 23-stock Software - SAAS industry.
Click here to see additional POWR Ratings for Value, Momentum, and Sentiment for ARQQ.
Better Therapeutics, Inc. (BTTX)
BTTX is a prescription digital therapeutics company that develops a form of cognitive behavioral therapy to address the causes of cardiometabolic diseases.
BTTX’s trailing-12-month ROCE, ROTC, and ROTA of negative 221.99%, 79.44%, and 173.3% compare to the industry averages of negative 40.91%, 22.05%, and 31.90%, respectively.
In terms of forward EV/Sales and Price/Sales, BTTX is trading at 289.37x and 295.10x, which are significantly higher than the 3.58x and 4.27x industry averages, respectively.
In March 2023, BTTX announced it would implement a reduction in force, impacting 35% of the workforce. The company is also implementing other cost savings measures to further extend its financial runway.
For the fiscal year that ended December 31, 2022, BTTX’s loss from operations increased 25.2% year-over-year to $38.26 million. Also, its net loss and net loss per share attributable to common shareholders came in at $39.76 million and $1.69 for the same period. Its total current assets stood at $18.45 million compared to $45.25 million for the prior-year period that ended December 31, 2021.
Analysts expect BTTX’s EPS to come in at negative $0.32 for the fiscal third quarter ending September 2023. For the fiscal year ending December 2023, its EPS is expected to come in at negative $1.28.
The stock has declined 9.1% over the past three months and 13.9% over the past six months to close its last trading session at $1.30.
BTTX’s poor prospects are reflected in its POWR Ratings. The stock has an overall rating of F, which translates to a Strong Sell in our proprietary rating system.
BTTX is also rated a D for Value and Momentum and an F for Growth and Quality. It is ranked #363 in the F-rated 387-stock Biotech industry.
Beyond what we have mentioned above, one can see additional POWR Ratings for, Stability and Sentiment for BTTX here.
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AMRC shares were trading at $43.82 per share on Friday morning, up $0.06 (+0.14%). Year-to-date, AMRC has declined -23.31%, versus a 7.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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