It’s not a perfect world out there for investors, but things may be starting to get better.
I recently went over some of the companies that are expected to post lower quarterly profits when they report this week. Thankfully, they’re the exceptions and not the rule.
| Company | Latest-Quarter EPS (estimated) | Year-Ago Quarter EPS |
|---|---|---|
| Questcor Pharmaceuticals (NASDAQ:QCOR) | $1.00 | $0.47 |
| MAKO Surgical Corp (NASDAQ:MAKO) | ($0.11) | ($0.14) |
| Groupon Inc (NASDAQ:GRPN) | $0.03 | ($0.02) |
| Monster Beverage Corp (NASDAQ:MNST) | $0.41 | $0.35 |
| OmniVision Technologies Inc. (NASDAQ:OVTI) | $0.41 | $0.13 |
Source: Thomson Reuters.
Clearing the table
Let’s start at the top with Questcor. The drugmaker’s multifaceted Acthar gel isn’t cheap at $23,000 per vial, and its marketing practices are being probed by the U.S. government. That’s been a dark cloud over the stock, but value investors are starting to nibble at Questcor here at less than eight times this year’s projected profitability and a healthy 2.6% yield.
Those valuations may not be sustainable if Questcor has to slash prices or if insurance companies stop offering coverage, but that didn’t stop analysts at Mizuho from upgrading the stock last week. Channel checks at Mizuho are turning up a welcome decline in reimbursement concerns.
Wall Street sees profitability more than doubling in Tuesday’s report, and you don’t see that too often with stocks fetching single-digit earnings multiples.
MAKO is the top dog in orthopedic robotics. It was certainly a dog last summer when the shares plummeted on weak sales of its RIO platform, even though the systems that were already in operation were still being used often.
Things haven’t improved for the profitless MAKO. The stock hit a fresh three-year low last month and continues to trade 75% off last year’s high.
Even the more bullish analysts don’t see MAKO turning a profit until next year, but the good news here is that Wall Street’s eyeing a much smaller deficit this time around. Yes, they also see a problematic year-over-year decline in revenue, but nobody’s perfect.
Groupon may be a surprising name on this list. The daily-deals leader that went public with plenty of hype at $20 two years ago has been continuously trading in the single digits since this past summer.
Then again, things may not be so bad here. For starters, the stock has gone on to more than double since bottoming out in November. Looking out to Wednesday’s report, analysts see the flash-sale giant reversing a year-ago loss with a reasonable profit.
Monster Beverage came under selling pressure late last year when regulators and a pair of congressmen voiced their concerns about the health risks of the company’s flagship energy drink. Despite the tumble, investors may be surprised that shares of Monster actually gained ground in 2012, keeping its four-year streak of higher closes intact.
Have the investigations and accusations eaten into Monster’s sales? We’ll get a great snapshot when Monster reports on Wednesday. The fundamentals appear to still be there. Analysts see revenue and earnings per share climbing 18% and 17%, respectively.
Finally, we have OmniVision posing for its quarterly picture. OmniVision was a market darling a couple of years ago as the leading maker of image sensors. As smartphones and tablets exploded in popularity — and quality cameras became a predominant one-upmanship feature — OmniVision was swamped with orders.
The market took a competitive turn, and OmniVision’s margins suffered. OmniVision has posted year-over-year declines in profitability for five consecutive quarters. That streak will likely come to a welcome end on Thursday. Wall Street sees profitability more than tripling to $0.41 a share. Yes, that’s less than half what OmniVision earned during the same fiscal third quarter two years ago, but the company is finally starting to convincingly head in the right direction.
Cross those fingers, but know the fundamentals
Investors in these five stocks have a right to be excited. They are all improving their financial situations. They are worthy of the gains that the market rally has bestowed upon them over the past year.
I wouldn’t be uncomfortable owning any of these companies. They’re doing the right thing, regardless of Mr. Market’s mood swings.
The expectations may be high, but these five stocks wouldn’t have it any other way.
The article 5 Reasons Not to Worry This Week originally appeared on Fool.com and is written by Rick Aristotle Munarriz.
Longtime Fool contributor Rick Aristotle Munarriz has no position in any stocks mentioned. The Motley Fool recommends MAKO Surgical and Monster Beverage. The Motley Fool owns shares of Monster Beverage.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
