Buying shares of a company after a major sell-off can often net you a tidy profit — assuming, of course, that the sell-off was an overreaction. Knowing if the company actually lost investors’ interest for no good reason is difficult, however. In taking a close look at firms, you can often see where things went wrong and how the share prices might improve. Let’s take a look to see whether Axiall Corp (NYSE:AXLL), Lululemon Athletica inc. (NASDAQ:LULU) and Foot Locker (NYSE:FL) warrant buys. These three firms have experienced either high or moderate declines in share prices, but those sell-offs don’t appear justified.
Axiall experienced a first-quarter blip
With the recent drop of about 25% at Axiall Corp (NYSE:AXLL) in the past couple of months, the firm looks to be a buy. The company was hit hard after completely missing analyst estimates for the first quarter by 38%. The firm was trading at $56.51 per share prior to the announcement, but it now trades at around $42.50. The company has recently merged and is just about to collect the bounty from cooperation with PPG Industries, Inc. (NYSE:PPG), however. The merger happened on January 28, well into the first quarter, and the multi-billion dollar merger resulted in increased costs. The benefits of that agreement will likely lead to improved business efficiency and increased profits in the years ahead.
Lululemon has its pants back on
The announced resignation by Lululemon Athletica inc. (NASDAQ:LULU)’s CEO resulted in a sell-off of over 20% between June 9 and 11. The decline is also likely affected by a yoga pants recall that increased costs in the quarter. The drop is unjustified considering that the company increased its revenue by more than 21% compared to the corresponding previous year’s quarter. Furthermore, the company’s earnings per share beat the consensus analyst estimate. Lululemon Athletica inc. (NASDAQ:LULU) is also expanding internationally and will set up shop in up in 15 new markets within the next several years.
Foot Locker is desired by feet everywhere
The shoe business is one of the most attractive for investors who want to add a recession-proof element to their portfolios. Furthermore, Foot Locker, Inc. (NYSE:FL) sells many athletic-related shoes, which are often purchased by young people. This physically-growing demographic will need new shoes as they outgrow what they formerly wore, and that means more shoe sales. The industry is also dominated by name brands which are continually coming out with newer versions that young people will want to tie to their feet.