Rock-bottom prices don't always mean rock-bottom businesses. The stocks we're examining today have all touched their 52-week lows, creating a classic investor's dilemma: bargain opportunity or value trap?
At StockStory, we dig beneath the surface of price movements to uncover whether a company's fundamentals justify its current valuation or suggest hidden potential. Keeping that in mind, here is one stock poised to prove the bears wrong and two where the skepticism is well-placed.
Two Stocks to Sell:
J&J Snack Foods (JJSF)
One-Month Return: -1.2%
Best known for its SuperPretzel soft pretzels and ICEE frozen drinks, J&J Snack Foods (NASDAQ:JJSF) produces a range of snacks and beverages and distributes them primarily to supermarket and food service customers.
Why Does JJSF Fall Short?
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Revenue base of $1.59 billion puts it at a disadvantage compared to larger competitors exhibiting economies of scale
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Estimated sales growth of 3.6% for the next 12 months implies demand will slow from its three-year trend
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ROIC of 6.8% reflects management’s challenges in identifying attractive investment opportunities
At $128.52 per share, J&J Snack Foods trades at 22.5x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than JJSF.
Accenture (ACN)
One-Month Return: -3.2%
With a workforce of approximately 774,000 people serving clients in more than 120 countries, Accenture (NYSE:ACN) is a professional services firm that helps organizations transform their businesses through consulting, technology, operations, and digital services.
Why Are We Hesitant About ACN?
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Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 3.1% for the last two years
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5.2 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
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Diminishing returns on capital suggest its earlier profit pools are drying up
Accenture is trading at $294.50 per share, or 22.6x forward price-to-earnings. To fully understand why you should be careful with ACN, check out our full research report (it’s free).
One Stock to Buy:
Texas Roadhouse (TXRH)
One-Month Return: -5.7%
With locations often featuring Western-inspired decor, Texas Roadhouse (NASDAQ:TXRH) is an American restaurant chain specializing in Southern-style cuisine and steaks.
Why Are We Bullish on TXRH?
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Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
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Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 9.1% over the past two years
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Free cash flow margin expanded by 2.7 percentage points over the last year, providing additional flexibility for investments and share buybacks/dividends