Fears of an impending recession due to high benchmark interest rates and tighter lending standards have kept the stock market volatile. Amid this backdrop, investors could capitalize on stocks witnessing solid momentum.
To that end, it could be wise to buy Simpson Manufacturing Co., Inc. (SSD), Gibraltar Industries, Inc. (ROCK), and Silvercrest Asset Management Group Inc. (SAMG). These stocks have been showing strong momentum lately and will likely maintain the same in the near term.
Before diving deeper into the fundamentals of these stocks, let’s discuss what’s affecting investor sentiment.
Inflation cooled for ten consecutive months, with the last one being a 4.9% annualized increase in April. Despite the decline, inflation remains above the Fed’s 2% target. Fed Chair Jerome Powell indicated that the central bank could forgo its benchmark interest rate increase during its next policy meeting.
However, the strong job growth and the 4.7% year-over-year rise in the Personal Consumption Expenditures index in April indicate stubbornness in the macroeconomic data, which might lead to the need to keep monetary policy tighter for longer.
In addition, the banking crisis, which is yet to ease, will likely lead to tighter lending standards. Therefore, the high borrowing costs will probably restrict economic growth. Considering these factors, it could be wise to buy the featured stocks to benefit from their momentum.
Let’s take a closer look at their fundamentals.
Simpson Manufacturing Co., Inc. (SSD)
SSD designs, engineers, manufacturers, and sells wood and concrete construction products. The company offers wood construction, pre-fabricated lateral systems, asphalt, and other repair products for use in concrete, masonry, and steel construction.
In terms of the trailing-12-month gross profit margin, SSD’s 45.02% is 50.3% higher than the 29.96% industry average. Likewise, its 25.31% trailing-12-month EBITDA margin is 91.4% higher than the industry average of 13.23%. Furthermore, the stock’s 7.46% trailing-12-month levered FCF margin is 43.6% higher than the industry average of 5.20%.
SSD’s net sales for the first quarter ended March 31, 2023, increased 8.3% year-over-year to $534.43 million. Its gross profit rose 6.8% over the prior-year quarter to $252.88 million. The company’s total assets increased 12.1% year-over-year to $2.56 billion. Also, its net income and EPS came in at $87.95 million and $2.05, respectively.
Analysts expect SSD’s EPS and revenue for fiscal 2024 to increase 5.1% and 3.8% year-over-year to $7.70 and $2.14 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. The stock has gained 36.9% year-to-date to close the last trading session at $120.84.
SSD’s stock is trading above its 50-day and 200-day moving averages of $115.57 and $99.57, respectively.
SSD’s POWR Ratings reflect this positive outlook. SSD has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #35 out of 91 stocks in the B-rated Industrial – Equipment industry. It has an A grade for Momentum and a B for Sentiment and Quality. Click here to see the other ratings of SSD for Growth, Value, and Stability.
Gibraltar Industries, Inc. (ROCK)
ROCK manufactures and distributes building products for the renewable energy, residential, ag-tech, and infrastructure markets in North America and Asia. It operates through four segments: Renewables, Residential, Agtech, and Infrastructure.
In terms of the trailing-12-month net income margin, ROCK’s 6.45% is 0.5% higher than the 6.42% industry average. Likewise, its 10.73% trailing-12-month EBIT margin is 10.7% higher than the industry average of 9.69%. Furthermore, the stock’s 7.50% trailing-12-month levered FCF margin is 44.4% higher than the industry average of 5.20%.
For the fiscal quarter ended March 31, 2023, ROCK’s net sales came in at $293.27 million. The company’s gross profit rose 18.6% over the prior-year quarter to $76.93 million. Its adjusted net income increased 10.2% over the prior-year quarter to $21.76 million. Its adjusted EPS came in at $0.70, representing an increase of 16.7% year-over-year.
For the quarter ending September 30, 2023, ROCK’s EPS and revenue are expected to increase 1.8% and 0.3% year-over-year to $1.14 and $392.53 million, respectively. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 31.6% to close the last trading session at $55.14.
ROCK’s stock is trading above its 50-day and 200-day moving averages of $50.60 and $48.68, respectively.
ROCK’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to Buy in our proprietary rating system.
Within the B-rated Industrial – Metals industry, it is ranked #4 out of 33 stocks. It has an A grade for Momentum and Sentiment and a B for Quality. To see ROCK’s Growth, Value, and Stability ratings, click here.
Silvercrest Asset Management Group Inc. (SAMG)
SAMG is a wealth management firm that provides financial advisory and related family office services. The company serves ultra-high-net-worth individuals and families, as well as their trusts; endowments; foundations; and other institutional investors. It also manages funds of funds and other investment funds.
In terms of the trailing-12-month EBITDA margin, SAMG’s 23.67% is 14.9% higher than the 20.60% industry average. Its 16.95% trailing-12-month Return on Common Equity is 52.6% higher than the 11.10% industry average. Likewise, its 0.63x trailing-12-month asset turnover ratio is 216% higher than the industry average of 0.20x.
SAMG’s revenue for the first quarter ended March 31, 2023, came in at $29.43 million. Its adjusted net income and adjusted EPS came in at $5.04 million and $0.35, respectively. Also, its adjusted EBITDA came in at $8.18 million.
Analysts expect SAMG’s EPS and revenue for the quarter ending September 30, 2023, to increase 13.7% and 8% year-over-year to $0.39 and $31.37 million, respectively. Over the past three months, the stock has gained 5.6% to close the last trading session at $19.26.
SAMG’s stock is trading above its 50-day and 200-day moving averages of $18.23 and $18.18, respectively.
SAMG’s POWR Ratings reflect this positive outlook. It has an overall rating of B, which translates to Buy in our proprietary rating system.
It is ranked #8 out of 54 stocks in the Asset Management industry. It has a B grade for Momentum, Stability, and Quality. Click here to see the other ratings of SAMG for Growth, Value, and Sentiment.
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REVISED: 2023 Stock Market Outlook >
SSD shares were unchanged in premarket trading Wednesday. Year-to-date, SSD has gained 37.02%, versus a 9.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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