Given the uncertain macroeconomic environment and persistent inflation, fundamentally weak food stocks BRC (BRCC) and Save Foods (SVFD) are expected to remain under pressure. Hence, it is best to stay away from these stocks. Keep reading.
Industry is under pressure due to persistently high inflation, tight monetary policy and fears of a looming recession. As food companies are expected to face margin pressure from rising raw material costs, investors are looking at fundamentally weaker food stocks BRC Inc. (BRCC) and Save Foods, Inc. (SVFD) before they spoil more.
Although the latest CPI report indicated a cooling of inflation, it is still above the Federal Reserve’s target of 2%. a Strong job growth in March And higher inflation will lead to more rate hikes by the Federal Reserve, raising fears that the economy could fall into recession.
Additionally, Cleveland Fed President Loretta Mester said That would require interest rates to rise above 5% Given the high prices. With fears of a heavy bearish on investor sentiment, it is best to avoid BRCC and SVFD. Although food stocks are recession-proof, weak fundamentals of these stocks can lead to a downward trend in prices.
BRC Inc. (BRCC)
BRCC buys, roasts and sells coffee, coffee accessories and branded apparel in the United States. The company also produces media content; podcasts; and sells digital and print journals, as well as coffee brewing equipment and outdoor and lifestyle gear.
In terms of trailing-12-month EBIT margin, BRCC’s negative 22.49% compares to an industry average of 7.64%. Its trailing-12-month return on debt is 41.11% on total capital, compared to an industry average of 6.42%. Likewise, its negative 40.52% trailing-12-month Leeward FCF margin 2.69% compares to the industry average.
In the fiscal fourth quarter ended December 31, 2022, BRCC’s operating loss increased 378.3% year-on-year to $19.46 million. Its net loss increased 334.8% year-on-year to $20.03 million. Additionally, its adjusted EBITDA loss widened significantly year-over-year to $11.42 million, while its net loss per share came in at $0.09.
Over the past one year, the stock has closed down 65.1% to close at $5.21 in the last trading session.
BRCC’s weak fundamentals are reflected in it POWR Ratings. The stock has an overall rating of F, which translates to a strong sell in our proprietary rating system. POWR Ratings evaluates stocks by 118 different factors, each with its own weight.
It is ranked #77 out of 79 stocks in Food Makers industry. It has an F grade for quality and a D for durability and value.
We have also assigned BRCC grades for Growth, Value and Momentum. Get all BRCC ratings here.
Save Foods, Inc. (SVFD)
Headquartered in Hod HaSharon, Israel, SVFD, an agri-food tech company, develops and sells eco-friendly green treatments for the food industry to increase food safety and shelf life of fresh produce.
In terms of trailing-12-month return on common equity, SVFD’s negative 93.10% compares to an industry average of 11.44%. Its trailing-12-month return on debt on total capital of 58.69% compares to an industry average of 6.81%. Likewise, its negative 88.41% trailing-12-month return on total assets compares to an industry average of 5.21%.
SVFD’s revenue from product sales for the fiscal year ended December 31, 2022, decreased 10.1% year-over-year to $394K. The company’s operating loss increased 23.7% year-on-year to $5.82 million. The company’s net loss attributable to shareholders increased 19.1% year-on-year to $5.74 million. Additionally, its loss per share fell 20.4% year-over-year to $1.64.
Over the past year, the stock has plunged 85.6% to close at $0.75 in the last trading session.
SVFD’s POWR ratings reflect its critical outlook. The stock has an overall rating of F, which equates to Strong Sell in our proprietary rating system.
It is ranked #78 in the same industry. Additionally, it has an F grade for value and durability and a D for quality.
To view SVFD’s additional ratings for Growth, Momentum and Sentiment, Click here.
What to do next?
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Shares of BRCC. Year-to-date, BRCC has fallen -14.73% versus a 9.17% rise in the benchmark S&P 500 index over the same period.
About the Author: Malaika Alphonsus
Malaika’s passion for writing and interest in financial markets led her to pursue a career in investment research. With degrees in economics and psychology, she wants to help investors make informed investment decisions.
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