The stock market has felt like a roller coaster lately with more down days than up. Just this week, we witnessed the Dow drop more than 800 points on Tuesday and watched the market continue to fall on Thursday. This after two difficult months of a broad market sell-off.
Big tech stocks have been some of the most recognizable victims of the recent market sell-off as investors flee from stocks with sky-high valuations after years of riding these stocks ever higher.
Investors may now want to look for stocks with low valuations that are currently in the bargain bin.
Below are two such stocks.
Kronos Worldwide (NYSE: KRO)
The titanium dioxide industry has been beaten up by Wall Street all year long on concerns about the commodity’s growth prospects. That anxiety has sent shares of the biggest titanium dioxide companies tumbling, and pushing producer Kronos Worldwide (NYSE: KRO) down -56% year-to-date.
And now Wall Street believes an oversupply of the pigment—which is used in food, consumer products, and in coating applications—is on the horizon despite the evidence suggesting otherwise. That makes me think that the titanium dioxide industry is ripe for a rebound and KRO looks like a great stock to grab now while it’s cheap before a rally in the market starts.
In Q3, the company reported that revenue had grown by 2%, gross profit climbed 18%, and operating income jumped 26%. The company was able to do that with 15% lower sales volume compared to the same period last year.
This year, KRO has also taken advantage of higher average selling prices to do maintenance on its facilities, reducing production volumes, and to put into action a new global enterprise resource planning system across its portfolio, reducing sales volume as the system ramped up.
Between the company’s performance metrics and operational upgrades this year, a decline of -56% seems steep. And if you consider the company’s valuation—the stock now trades at just 1.6 times book value and 3.4 times EV to EBITDA—it looks even more attractive.
Analysts’ average price target for KRO is $25.33, suggesting possible upside of 124.59% over the next twelve months.
Columbus McKinnon (NASDAQ: CMCO)
Columbus McKinnon (NASDAQ: CMCO) designs, manufactures, and markets hoists, actuators, cranes, rigging tools, digital power control systems, and other material handling products for commercial and industrial applications worldwide.
The company is in the midst of restructuring in order to reduce expenses so that it can pay down debt and increase R&D spending on its industrial automation products. If the company is successful in this, buying shares now while they’re a bargain could prove to pay off big time.
In its most recently reported quarter, CMCO reported that operating margins jumped from 2.4% to 11.4%, and its adjusted earnings per share rose 37% to $0.70. The company’s management said it has “identified approximately $7 million in potential savings for fiscal 2019 alone,” and as cost cutting continues, they expect EPS to grow by double-digits over the next three years.
In its fiscal 2018, sales growth and margin growth enabled the company to wipe-out $60 million in debt and CMCO plans to eliminate another $60 million in debt in fiscal 2019. Management believes it can generate $65 million in free cash flow by 2021, which is up from $55 million in FY18. And with that, the company should be able to meet its R&D spending target of $27 million in 2021, up considerably from the $16 million it spent on R&D in 2017.
Shares are down nearly -19% year-to-date, but if the company is able to meet its financial targets, the price could be heading much higher, making now a good time to buy while the stock is cheap.
The average twelve-month price target for CMCO is $51.33, indicating possible upside of 58.39%. Just over a month ago, Craig Hallum set their price target on the stock rating it a Buy. They set their price target at $54 – 69% higher than Thursday’s closing price.