Inpouring macro data last month had raised concerns of an impending Fed-induced recession. The investors’ sentiment was further dashed by the Fed’s recent hawkish statements. As the volatilities will not likely subside anytime soon, let us explore some very cheap stocks, Accel Entertainment, Inc. (ACEL), trivago N.V. (TRVG), and Epsilon Energy Ltd. (EPSN), trading at a discounted valuation.
Fed Chair Jerome Powell testified before the House Financial Services Committee on Wednesday amid lingering inflation and recessionary fears. The existing anxieties among investors soared on the backs of Powell’s hawkish statements and strong labor-market data.
Experts anticipate that the Fed’s tight monetary policy could inflict damage on the financial system and cause a recession. Where on the one hand, some anticipate a rolling recession.
Furthermore, Morgan Stanley (MS) strategists have warned that since U.S. stocks appear overvalued now, a stock market crash might be on the cards. The team in the bank's wealth management division commented, "The stock market and the credit market are fighting the Federal Reserve's likely path of rising interest rates. US stock valuation is at an extreme."
Amid such volatilities, fundamentally strong and cheap stocks ACEL, TRVG, and EPSN could be ideal investments that investors might regret not buying in 2023.
Accel Entertainment, Inc. (ACEL)
ACEL operates as a distributed gambling operator in the United States and is involved in the setup, maintenance, and management of gaming terminals. It offers licensed establishment partners gaming options that appeal to players patronizing those facilities. ACEL also runs independent ATMs in both gaming and non-gaming venues.
ACEL repurchased $17 million of Accel Class A-1 common stock in the fourth quarter of 2022 and $79 million for the full year 2022.
ACEL’s trailing-12-month levered FCF margin of 4.98% is 237.8% higher than the 1.47% industry average. Its trailing-12-month ROCE of 43.97% is 270.4% higher than the 11.87% industry average.
ACEL’s forward non-GAAP P/E of 11.38x is 21.5% lower than the 14.50x industry average. Its forward EV/EBITDA multiple of 6.42 is 35.4% lower than the industry average of 9.94.
ACEL’s total net revenue grew 44.6% year-over-year to $278.07 million in the fiscal fourth quarter that ended December 31, 2022. Its operating income increased 47.1% year-over-year to $25.09 million. The company’s adjusted EBITDA rose 30.3% year-over-year to $43.31 million, while adjusted net income increased 20.4% year-over-year to $20.82 million.
Analysts expect the company’s EPS and revenue for the current fiscal quarter (ending March 2023) to grow 8.1% and 36.9% year-over-year to $0.20 and $269.54 million, respectively.
Shares of ACEL have gained 8.7% over the past three months to close its last trading session at $8.95.
This promising prospect is reflected in ACEL’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Value and Quality. It is ranked #6 in the 31-stock Entertainment - Casinos/Gambling industry.
To see additional ratings of ACEL for Growth, Stability, Sentiment, and Momentum, click here.
trivago N.V. (TRVG)
Headquartered in Düsseldorf, Germany, TRVG operates a hotel and accommodation search platform globally. The company offers an online meta-search for hotels and accommodations through online travel agencies, hotel chains, and independent hotels.
TRVG’s trailing-12-month gross profit margin of 97.63% is 96.7% higher than the 49.63% industry average. Its trailing-12-month ROTC of 5.97% is 68.6% higher than the 3.54% industry average.
TRVG’s forward non-GAAP P/E of 6.98x is 57.4% lower than the industry average of 16.37x. Its forward EV/Sales of 0.47x is 75.5% lower than the industry average of 1.91x. Also, its forward EV/EBITDA of 2.73x is 67.7% lower than the industry average of 8.45x.
For the fiscal fourth quarter that ended December 31, 2022, TRVG’s total revenue increased 17.7% year-over-year to €104.89 million ($110.81 million). Its operating income improved 34.7% from the prior-year period to €17.76 million ($18.76 million). Adjusted EBITDA rose 15.3% year-over-year to €22.60 million ($23.88 million).
Street expects TRVG’s EPS to increase 6.5% year-over-year to $0.04 for the fiscal first quarter ending March 2023. Furthermore, revenue for the same quarter is expected to rise 26.8% from the prior-year period to $135.40 million. The company surpassed EPS estimates in three of the four trailing quarters.
The stock has gained 28.8% over the past three months to close its last trading session at $1.70. Moreover, it gained marginally intraday.
It is no surprise that TRVG has an overall A rating, which equates to a Strong Buy in our POWR Ratings system.
TRVG has an A grade for Quality and a B for Growth and Value. In the Internet industry, it is ranked first out of 59 stocks.
Click here for the additional POWR Ratings for Momentum, Stability, and Sentiment for TRVG.
Epsilon Energy Ltd. (EPSN)
EPSN acquires, develops, gathers, and produces oil and gas reserves in the United States. It operates through Upstream and Gathering System segments.
Recently, EPSN announced that its board of directors had declared a dividend of $0.0625 per share of common stock (annualized $0.25 per share), payable to stockholders on March 31, 2023. This reflects its ability to pay back its shareholders.
EPSN’s trailing-12-month levered FCF margin of 35.87% is 441.3% higher than the 6.63% industry average. Its trailing-12-month ROTC of 34.56% is 290.6% higher than the 8.85% industry average.
The stock’s trailing-12-month EV/EBITDA of 1.77x is 70% lower than the industry average of 5.89x. Its trailing-12-month EV/Sales multiple of 1.36 is 23.2% lower than the industry average of 1.77.
EPSN’s total revenue came in at $21.24 million for the fiscal third quarter that ended September 30, 2022, up 62.2% year-over-year. Its adjusted EBITDA stood at $16.54 million, up 143.7% year-over-year. Its net comprehensive income came in at $9.57 million, up 585.6% year-over-year, while its net income per share came in at $0.41, up 583.3% year-over-year.
Over the past month, the stock has lost 1.8% to close the last trading session at $5.49.
EPSN’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
In addition, it has an A grade for Quality and a B for Value and Sentiment. EPSN is ranked #2 within the B-rated 91-stock Energy – Oil & Gas industry.
Click here to get additional EPSN ratings (Growth, Momentum, and Stability).
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ACEL shares were trading at $8.93 per share on Friday morning, down $0.02 (-0.22%). Year-to-date, ACEL has gained 15.97%, versus a 2.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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