Concerns over the Fed’s aggressive monetary policy tightening and a potential recession have created immense pressure on the stock market over the past couple of months, resulting in some quality stocks trading at attractive prices. Given this backdrop, we think it could be wise to buy shares of fundamentally strong companies Radian Group (RDN), Broadcom (AVGO), and Rimini Street (RMNI) before Wall Street catches on. Let’s discuss….
The stock market has been under tremendous pressure over the past couple of months due to high inflation, the Fed’s aggressive monetary tightening, and the chances of a recession. The Federal Reserve has tried to contain the surging inflation by raising benchmark interest rates thrice this year and is expected to decide on another 75 basis-point increase next week.
Aditya Bhave, the senior US economist at Bank of America Securities, said, “There seems to be an inflation tax on the consumer, and that continues to build up and take its toll and eventually pushes the economy into a mild recession.”
Some fundamentally strong stocks have corrected due to the recent market turmoil and are trading at attractive entry points. Investors can consider utilizing this opportunity and add quality stocks Radian Group Inc. (RDN), Broadcom Inc. (AVGO), and Rimini Street, Inc. (RMNI) to their portfolios before Wall Street lays its eyes on them.
With strong cash flows and solid growth prospects, these stocks are well positioned to soar in the upcoming months.
Radian Group Inc. (RDN)
RDN provides mortgage insurance and real estate services in the United States. The company operates through its two business segments: Mortgage and Homegenius.
On July 13, 2022, RDN introduced Radian Mortgage Capital LLC (RMC), a mortgage conduit formed to expand market opportunities and offer an alternative funding source to lenders. Through RMC, the company broadens its market reach with respect to managing residential mortgage credit risk.
RDN’s service revenue for its fiscal first quarter ended March 31, 2022, increased 28.2% year-over-year to $29.35 million. Its net income increased 44.2% from the prior-year period to $181.13 million, while its net income per share stood at $1.01, up 57.8% from the year-ago period. Also, its adjusted pretax operating income increased 58.4% year-over-year to $264.95 million.
For the quarter ending September 30, 2022, RDN’s EPS and revenue are expected to increase 11.3% and 2% year-over-year to $0.75 and $332.21 million, respectively. It surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained 15.2% over the past month to close the last trading session at $21.21.
RDN’s POWR Ratings reflect this promising outlook. The POWR Ratings assesses stocks by 118 different factors, each with its own weighting. The stock has a B grade for Momentum.
RDN is ranked #23 out of 110 stocks in the Financial Services (Enterprise) industry. Click here to see the other ratings of RDN for Growth, Value, Stability, Sentiment, and Quality.
Broadcom Inc. (AVGO)
AVGO designs, develops, and supplies a range of semiconductor devices focusing on complex and mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products. It operates through two segments: semiconductor solutions and infrastructure software.
On May 26, 2022, AVGO announced the acquisition of VMware, Inc. (VMW) for approximately $61 billion in cash and stock. This acquisition should accelerate software scale, growth opportunities for the company, and fuel revenues.
In the second quarter ended May 1, 2022, AVGO’s net revenue increased 22.5% year-over-year to $8.10 billion. Its adjusted EBITDA rose 29.1% year-over-year to $5.11 billion, while its non-GAAP net income came in at $4 billion, up 34.2% from its year-ago period. AVGO’s non-GAAP EPS stood at $9.07, indicating a 37.4% year-over-year increase.
For the third quarter (ending July 2022), AVGO’s revenue is expected to increase 24% year-over-year to $8.41 billion. The Street expects its EPS to increase 37.3% year-over-year to $9.55 in the current quarter. The company surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of AVGO have gained 9.2% over the past year to close the last trading session at $511.77.
AVGO has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It has an A grade for Growth and Quality and a B grade for Sentiment. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #5 out of 94 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see the AVGO ratings for Value, Momentum, and Stability here.
Rimini Street, Inc. (RMNI)
RMNI is a global provider of enterprise software support products and services. Its products and services seek to enable its clients to keep their systems operating and to remain in tax, legal and regulatory compliance; improve productivity; and allocate limited budgets, labor, and other resources to investments.
On June 22, 2022, the State Library of Victoria entrusted its Oracle software support and security to RMNI. On May 25, 2022, E-LAND Innople, an IT affiliate of the South Korean conglomerate E-Land Group, chose RMNI street support services for SAP S/4 HANA. This reflects the strong demand for the company’s services and customer reliability.
In the fiscal 2022 first quarter (ended March 31, 2022), RMNI’s total revenues increased 11.4% year-over-year to $97.91 million. Its adjusted operating income increased 30% from the year-ago value to $12.10 million, while its non-GAAP net income improved 9% year-over-year to $9.25 million.
Also, its adjusted EBITDA stood at $12.89 million, up 20.9% year-over-year. The company’s net income per share came in at $0.03, representing a 123.1% year-over-year improvement.
For the quarter ended June 30, 2022, RMNI’s EPS is expected to increase 13.3% year-over-year to $0.11, while its revenue is expected to increase 8.3% year-over-year to $99.23 million. It has surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 14% and 18.6% over the past three and six months, respectively, to close the last trading session at $6.44.
RMNI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which equates to a Strong Buy in our POWR Ratings system. In addition, it has an A grade for Quality and a B for Growth and Value.
RMNI is ranked first in the Software – Application industry. Click here to see the ratings of RMNI for Momentum, Stability, and Sentiment.
RDN shares were trading at $20.99 per share on Thursday morning, down $0.22 (-1.04%). Year-to-date, RDN has gained 1.13%, versus a -16.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta’s profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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