With earnings season in full-swing, and with countless large moving stocks, I am looking at four companies that reported earnings on Wednesday that I believe are a “buy,” regardless of the stock’s initial reaction.
An Under-the-Radar Stock to Watch
Mueller Water Products, Inc. (NYSE:MWA) saw gains of more than 13% after the company announced earnings that handily beat expectations. The company experienced sales growth of 12.6% year-over-year (yoy) and swung from a net loss of $0.70 per share to a profit of $0.05. The company saw a 21.70% boost in the shipment volume of valves, hydrants, and brass products, thus pushing its operating margins higher by 670 basis points.
Here’s the thing, if Mueller Water Products, Inc. (NYSE:MWA) would have seen zero revenue growth with the same margin growth I would have still said it was a “buy.” This company improved drastically, has double-digit growth, and is a very cheap stock with a price/sales ratio of just 0.90. I believe the uptrend for the stock is just warming up, and that further gains are to come as investors take notice of this company.
A Big Miss by the Numbers but a Huge Beat by the Valuation
Questcor Pharmaceuticals Inc (NASDAQ:QCOR) opened on Wednesday with losses of about 3%, but eventually rallied to trade near flat. The company reported earnings that missed expectations by a wide margin. However, the company still saw top-line growth of 41% and when compared to its valuation the stock is very cheap.
Questcor Pharmaceuticals Inc (NASDAQ:QCOR) is trading at just 6 times next year’s earnings, yet has 40% growth. In biotechnology, ratios such as this don’t exist, and when you combine the fact that QCOR pays an annual yield of more than 3% and is buying back its own stock, I am not sure how the stock Is not a buy.
A Controversial Energy Play With Strong Fundamental Improvements
After Chesapeake Energy Corporation (NYSE:CHK) announced its earnings report the stock initially shot higher by 4%, but has since fallen 2% as fears regarding its asset sale and liquidity position resurfaced. While these fears are a reason for concern, I was highly impressed with the company’s quarter, especially considering the volatility of energy at this point in time.
I liked its 9% rise in total production, the lowered guidance on operating expenses, and the fact that Chesapeake Energy Corporation (NYSE:CHK) still has the greatest collection of energy assets in the U.S. So far the company has sold $2 billion of assets with $5 billion left to reach its target. I think the company is improving and with it trading at just 10.0 times next year’s earnings I think CHK is a “Buy” on the post-earnings weakness.