Impressive corporate earnings, a strengthening job market, and steady bond yields have recently propelled key benchmark indices to record highs. However, the market is expected to witness significant volatility as investors await more details from the central bank’s annual symposium and its plan to pull back on monetary stimulus. Consequently, many analysts expect a broader market correction in the near term. Moreover, the personal consumption expenditures price index rose 4.2% year-over-year in June, so rising inflationary pressure continues to spook investors.
Since a market correction could lead highly priced stocks to lose considerable value, we believe it may be prudent to bet on stocks that are currently trading at affordable prices and have adequate fundamental strength to generate returns.
ICL Group Ltd (ICL) and LSI Industries Inc. (LYTS) possess strong balance sheets and are currently trading at less than $10. So, it could be wise to bet on these stocks now.
ICL Group Ltd (ICL)
Headquartered in Israel, ICL and its subsidiaries operate as specialty minerals and chemicals providers globally. Industrial Products; Potash; Phosphate Solutions; and Innovative Ag Solutions are the ICL’s four operational segments. It sells its products through marketing companies, agents, and distributors.
Last month, ICL announced the launch of the ICL Planet Startup Hub. This innovation platform is expected to assist in introducing innovative foodTech and agriTech start-ups to the market and providing a broad network of support, including funding and mentorship.
Also last month, ICL acquired Compass Minerals America do Sul S.A. for approximately $420 million. The acquisition includes the Compass Minerals’ South American Plant Nutrition division. Through this acquisition, the company aims to achieve a leadership position in the plant nutrition markets and accelerate its journey towards global leadership in the Ag solutions division.
During the second quarter, ended June 30, 2021, ICL’s sales increased 34% year-over-year to $1.62 billion. Its operating income came in at $243 million, compared to a $169 million operating loss in the prior-year quarter. The company reported $140 million in net income, versus a $168 million net loss in the second quarter of 2020. Furthermore, its net cash from operating activities increased 36.7% year-over-year to $242 million over this period.
Analysts expect ICL’s revenue to increase 3.9% year-over-year to $6.67 billion next year. In addition, its EPS is expected to increase 8.5% in its fiscal year 2022. The stock has gained 76.2% in price over the past year and 40.2% year-to-date.
Closing yesterday’s trading session at $6.89, the $8 average analyst price target represents a potential 16.1% upside.
ICL’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ICL has also been rated a B grade for Quality, Stability, and Value. Within the A-rated Chemicals industry, it is ranked #4 of 95 stocks.
To see additional POWR Ratings for Growth, Momentum, and Sentiment for ICL, click here.
LSI Industries Inc. (LYTS)
LYTS manufactures, markets, and sells corporate visual image solutions in the United States, Canada, Mexico, Australia, and Latin America. Lighting and Graphics are the Cincinnati, Ohio company’s two business segments.
In May, LYTS acquired privately held JSI Store Fixtures—a market-leading retail and commercial display solutions provider—from RFE Investment Partners for $90 million in cash. The acquisition might enable the company to expand its market presence in the grocery and convenience store verticals, and further drive its revenue growth.
During its fourth fiscal quarter, ended June 30, 2021, LYTS’ net sales increased 53% year-over-year to $97.02 million. Its gross profit grew 45.3% to $22.90 million over this period. The company’s adjusted EBITDA surged 49% year-over-year to $6.82 million.
LYTS is expected to witness 25.2% revenue growth next year. In addition, its EPS is estimated to increase 125% year-over-year to $0.27 in 2021. Over the past month, LYTS’ stock has gained 12.9%.
A $16.5 consensus price target represents a 97.8% potential gain from its $8.39 last closing price.
LYTS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our POWR Ratings system. The stock also has an A grade for Value and Sentiment, and a B for Momentum and Quality. In the B-rated Industrial – Equipment industry, it is ranked #2 of 90 stocks.
In total, we rate LYTS on eight different levels. Beyond what we’ve stated above, we have also given LYTS grades for Stability and Growth. Get all the LYTS ratings here.
Click here to check out our Industrial Sector Report for 2021
ICL shares were trading at $7.02 per share on Friday afternoon, up $0.13 (+1.89%). Year-to-date, ICL has gained 41.09%, versus a 21.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More…
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