Examine these two consumer cyclical stocks priced under $20 - Kalkine Media

October 26, 2023 06:10 AM PDT | By Akanksha Vashisht
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Summary

  • Consumer cyclical stocks tend to perform well during times of economic growth and consumer confidence.
  • Ford Motor Company, an automobile firm, closed the market higher by 1.32% on an intraday basis on Wednesday.
  • Virco Manufacturing Corp., a furniture retailer, rose 2.58% intraday as at the close of trade on Wednesday.

Consumer cyclical stocks represent shares in companies operating in sectors that move highly in sync with economic cycles and consumer spending habits. Some examples of such sectors include retail, hospitality, and automobiles.

In these sectors, the demand tends to rise during times of economic growth and consumer confidence but may dip during economic downturns or recession.

During periods of economic expansion, these stocks often experience strong growth as consumers have more disposable income to spend on non-essential goods and services. Moreover, some consumer cyclical companies have strong brand recognition and customer loyalty, which can contribute to stable long-term growth.

However, it's crucial to keep in mind that they can be more volatile during economic downturns, so a well-rounded investment strategy should consider the broader economic context and individual company performance.

With that, let us examine two consumer cyclical stocks that moved in the green on Wednesday, October 25, 2023.

Ford Motor Company (NYSE: F)

Holding over 12% market share in the US, Ford is credited with the birth of the modern assembly line production and for introducing the world to some of the most iconic vehicle models.

The company’s revenue for Q2 2023 increased by 12% year-over-year, reaching US$45 billion, while both net income ($1.9 billion) and adjusted EBIT ($3.8 billion) also showed an increase. Cash and liquidity remained robust for the quarter.

The popularity of Ford Pro among commercial customers led to a remarkable 22% revenue growth, with EBIT more than doubling to US$2.4 billion, resulting in a 15% margin. Ford Model e revenue experienced a 39% rise. Ford has put in scaling efforts and competitive pricing, which are further expected to establish its leadership among next-generation EVs. 

The company raised its full-year 2023 guidance for adjusted EBIT to be in the range of US$11 billion to US$12 billion and for adjusted free cash flow to fall between US$6.5 billion and US$7 billion.

F Price Chart; Powered By: TradingView

Based on Wednesday’s closing price of US$11.54, F has a P/E ratio of 11.13x and a dividend yield of 5.20%. At the market close on Wednesday, the stock was 1.32% higher on an intraday basis. Meanwhile, it closed 2.37% lower on a YTD basis.

Virco Manufacturing Corporation (NASDAQ: VIRC)

Virco Manufacturing Corp specializes in creating, manufacturing, and delivering high-quality furniture designed for use in the commercial and education sectors.  

Virco announced a 30% year-over-year growth in revenue for the second quarter ending on July 31. Their revenue increased from US$82.8 million to US$107.3 million. This growth was attributed to the successful conversion of a record backlog into on-time deliveries for the upcoming school year, supported by U.S. factories and logistics operations.

Additionally, with material and freight costs stabilizing, the company's domestic operations saw improved profitability, resulting in a nearly doubled operating income for the second quarter, which increased from US$11.1 million to US$21.2 million.

VIRC Price Chart; Powered By: TradingView

Based on Wednesday’s closing price of US$6.76, VIRC has a P/E ratio of 4.12x. At the market close on Wednesday, VIRC rose 2.58% intraday and by 44.75% YTD.

 


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