The monthly consumer price index increased 8.6% year-over-year in May, registering the highest rise since December 1981. The hot inflation report has further fuelled concerns about the Fed’s aggressive interest rate hikes and a potential recession among investors. Wall Street suffered its worst week since January following the inflation report released last Friday. The S&P 500 index has declined 18.2% year-to-date, while Dow Jones has plunged 13.6% year-to-date.
However, the recent market sell-off has provided a promising opportunity for investors to invest in fundamentally solid stocks trading now at attractive valuations. Given their robust financials, healthy cash flows, and solid growth attributes, these stocks are expected to recover in the coming months.
Against the backdrop, we think quality stocks Arhaus, Inc. (ARHS) and InMode Ltd. (INMD), which have declined more than 50% in price year-to-date, are well-positioned to rebound in the near term.
Arhaus, Inc. (ARHS)
ARHS is a lifestyle brand and omnichannel retailer of premium home furnishings. The company provides merchandise collections across various categories, including furniture, textiles, décor, lighting, and outdoor. It distributes its products through an omnichannel model consisting of showrooms, an e-commerce platform, and in-home designer services. It operates through a network of more than 71 traditional showrooms, 5 Designer Studios, and 58 showrooms with in-home interior designs.
On March 1, ARHS debuted its Outdoor 2022 Collection. The company pulled inspiration from the islands of Greece, and the collection’s wide variety of outdoor décor ranges from lighting and performance rugs to solutions for both shade and fire. Also, artisan-crafted pillows and poufs are offered in cobalt and sapphire blues with an eclectic collection of accent furniture, throw blankets, and other essentials in warm neutrals. The new collection might boost the company’s revenue streams and growth.
ARHS' net revenue increased 43.8% year-over-year to $246.30 million in the fiscal 2022 first quarter ended March 31, 2022. Its income from operations rose 102.7% year-over-year to $22.87 million. The company’s adjusted EBITDA grew 22.4% from the year-ago value to $31.20 million. In addition, its net and comprehensive income attributable to ARHS came in at $16.06 million, registering a rise of 312.3% year-over-year.
Analysts expect ARHS’ EPS to grow 84.3% year-over-year to $0.22 for the fiscal 2022 fourth quarter, ending December 31, 2022. The $367.85 million consensus revenue estimate for the same quarter represents a 54.6% rise from the same period in 2021.
ARHS’ shares have declined 56.2% year-to-date and closed Friday’s trading session at $5.53.
ARHS' POWR Ratings reflect this promising outlook. It has an overall grade of B, equating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ARHS has a grade of A for Sentiment and B for Quality. Within the Home Improvement & Goods industry, it is ranked #14 of 63 stocks. To see additional POWR Ratings (Value, Momentum, Growth, and Stability) for ARHS, click here.
InMode Ltd. (INMD)
Headquartered in Yokneam, Israel, INMD designs, develops, manufactures, and sells minimally invasive aesthetic medical products based on its proprietary radiofrequency assisted lipolysis and deep subdermal fractional radiofrequency technologies in the U.S. and internationally. Additionally, the company develops, manufactures, and markets non-invasive medical aesthetic products that target a range of procedures, including hair reduction, cellulite treatment, skin appearance and texture, and wrinkle reduction.
On March 10, INMD’s Board of Directors approved a share repurchase program of up to 1 million shares. “InMode continues to focus on making fiscally responsible investments while delivering value to shareholders. Our strong balance sheet, positive cash flow, and continued growth triggered the decision of the board to authorize another buyback plan as soon as the previous one ended,” said Yair Malca, INMD’s Chief Financial Officer.
In the fiscal 2022 first quarter ended March 31, 2022, INMD’s non-GAAP revenues increased 31.1% year-over-year to $85.92 million, while its non-GAAP gross profit improved 28.4% year-over-year to $71.46 million. The company’s non-GAAP income from operations grew 29.3% year-over-year to $38.10 million. Also, its non-GAAP net income and non-GAAP net income per share stood at $34.07 million and $0.40, respectively, registering an increase of 15.7% and 17.6% from the prior-year period.
The $416.84 million consensus revenue estimate for the fiscal year 2022, ending December 2022, represents a 16.6% improvement from the last year. Analysts expect INMD’s EPS for the fiscal year 2023 to increase 12.6% year-over-year to $2.35. The company has an impressive revenue and earnings history as it has topped the consensus revenue and EPS estimates in each of the trailing four quarters.
INMD has plunged 64% year-to-date to close Friday’s trading session at $23.67.
INMD’s POWR Ratings reflect a strong outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
INMD has a grade of A for Quality and B for Value. Among the 148 stocks in the Medical - Devices & Equipment industry, it is ranked #31. Click here for the additional POWR Ratings for Sentiment, Stability, Momentum, and Growth for INMD.
ARHS shares were unchanged in after-hours trading Monday. Year-to-date, ARHS has declined -59.77%, versus a -20.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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