In the midst of earnings season it is easy to bypass those companies with strong fundamental performance. Often we see those that trade considerably higher and assume that it was due to incredible fundamental performance. Sometimes this is incorrect, and in this piece I am looking at three under-the-radar companies that look attractive following earnings.
This Stock May be Expensive, but it’s Worth it!
Core Laboratories N.V. (NYSE:CLB) traded higher by 11% during the final two days of last week, behind very strong earnings. The company beat on both the top and bottom line with low double digit growth and issued guidance above the consensus. The stock now trades at 6.30 times sales and a forward P/E ratio of 23.45. Therefore, CLB is far more expensive then I typically purchase, but for this company, I am willing to make an exception.
Despite what appears to be an over-priced stock, Core Laboratories N.V. (NYSE:CLB) has all patented technology and operates in a massive market as the Google of oil/gas production. It is an energy technology company, creating the technology needed to squeeze more crude and gas from existing reservoirs; also helping energy companies determine where to drill.
During its last quarter, all three of its divisions hit new records, and the company continues to benefit from stronger partnerships and a diversified 80% of its business being international. After such a strong quarter, I see no reason not to buy this stock, especially with the price of crude being so low.
A High Growth Mega Company to Buy Now
Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) staged a two-day 10% rally to end last week after strong earnings. The $100 billion company beat on both the top and bottom line as net profit grew 18% and revenue grew 26% year-over-year (yoy). Furthermore, the company’s margins expanded and it raised guidance on top of strong demand for smartphones and tablets.
Here’s a company that really had nothing bad to say during its quarter, as the world’s largest chip foundry continues to grow rapidly. The company is constantly beginning new production of different sized chips and now forecasts industry growth of 10%, far better than its previous guidance of 7%.
In regards to its investment outlook, the company pays a 2.65% yield and trades at just 13.72 times next year’s earnings. Sure, the company does have a hefty price/sales ratio due to high margins, but is seeing solid growth and has a very healthy balance sheet. Therefore, I’d buy at these undervalued levels!
A Stock that May Have Reached the Bottom of its Decline
Advanced Micro Devices, Inc. (NYSE:AMD) closed on Friday with a loss of 1.59% after reporting earnings, but on Thursday had seen a late push higher for gains of almost 10%. During the last week the stock was flat, and this occurred despite earnings that beat expectations. Yet despite this beat, revenue declined 31% yoy and the company’s gross margins continue to show significant weakness.
The weak PC market combined with AMD’s lost share in the industry has contributed to the stock’s large 70% decline over the last year. Thankfully, all of its problems are appropriately priced into its valuation, and for the first time, AMD saw some real progress.
First off, I was highly encouraged that the company beat expectations. Second, the company raised Q2 guidance. Third, server CPU revenue rose quarter-over-quarter. Lastly, the company stated that it is regaining desktop GPU share. These facts combined with an underperforming stock trading at just 0.38 times sales, gives me reason to be bullish, and believe that AMD might just be worth the risk.
“When a stock trades lower following a great report, it may be your best opportunity to buy.” Taking Charge With Value Investing (McGraw-Hill, 2013)
The key to successfully trading the reactions to earnings is to first read the report and to then look at a stock’s reaction. Then, you can find inconsistencies, and profit from those inconsistencies. With these three companies, all posted solid quarters relative to their valuations, and because of that fact, I believe that each presents some level of upside from this point forward.
The article 3 Stocks to Buy After Last Week's Earnings originally appeared on Fool.com.
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