Wall Street closed lower in the last session as concerns mounted over a cooling economy, indicated by a drop in job openings to a nearly two-year low and a second consecutive month of falling factory orders. Moreover, macroeconomic headwinds might impact corporate profits.
I think fundamentally weak stocks, Neovasc Inc. (NVCN), TFF Pharmaceuticals, Inc. (TFFP), and National CineMedia, Inc. (NCMI), are best avoided as they gear up to release their earnings reports.
While the stock market had a solid start to this year, JPMorgan strategists led by Marko Kolanovic said in a recent note that the market is unlikely to sustain its recent months’ gains.
They wrote, “The Fed indicated no intention to cut interest rates this year, yet risk assets are exhibiting an unprecedented rally. For a rational investor, we think this makes little sense. We expect a reversal in risk sentiment and the market re-testing last year’s low over the coming months.”
Strategists also noted that the US economy is likely on track for a hard landing scenario, with recent bank crises significantly raising the odds of a recession.
Take a look at the stocks mentioned above:
Neovasc Inc. (NVCN)
NVCN is a specialty medical device company that develops, manufactures, and markets products for cardiovascular marketplace in Europe and internationally. Its products include the Tiara technology for the transcatheter treatment of mitral valve disease and the Neovasc Reducer for treating refractory angina.
In terms of forward EV/Sales multiple of 6.55 is 78.3% higher than the industry average of 3.67. Its trailing-12-month P/S of 8.55x is 122% higher than the 4.03x industry average.
NVCN’s trailing-12-month gross profit margin of negative 68.60% compares with the industry average of 55.83%. Its trailing-12-month negative ROCE, ROTC, and ROTA of 78.25%, 35.86%, and 75.19% are lower than their respective industry averages of negative 40.14%, 21.78%, and 31.61%.
NVCN’s total expenses increased 12.3% year-over-year to $37.18 million during the fiscal year that ended December 2022. Its operating loss grew 9.8% from the prior year to $34.15 million. Moreover, loss for the year rose 65.6% year-over-year to $41.20 million, while loss per share increased 52.5% year-over-year to $15.07.
NVCN’s loss per share is expected to be $8.42 for the fiscal year 2023. The company has failed to surpass the consensus EPS estimates in each of the trailing four quarters, which is disappointing.
The stock declined marginally intraday, closing the last trading session at $29.67. It has a 24-month beta of 1.41.
NVCN’s POWR Ratings reflect its bleak outlook. The stock has an overall D rating, which equates to a Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
NVCN has an F grade for Value, Stability, and Quality. It is ranked #132 among 146 stocks in the D-rated Medical - Devices & Equipment industry.
Click here to see the additional POWR Ratings for NVCN (Growth, Momentum, and Sentiment).
TFF Pharmaceuticals, Inc. (TFFP)
TFFP is a clinical-stage biopharmaceutical company that focuses on developing and commercializing drug products based on its patented Thin Film Freezing (TFF) technology platform in the United States and Australia.
TFFP’s trailing-12-month P/S multiple of 86.21 is significantly higher than the industry average of 4.02. Its trailing-12-month EV/Sales of 56.51x compares with the 3.89x industry average.
TFFP’s trailing-12-month negative ROCE, ROTC, and ROTA of 104.75%, 65.39%, and 170.30% are lower than the negative industry averages of 40.14%, 21.78%, and 31.61%.
During the fiscal year that ended December 2022, TFFP’s total operating expenses rose 1.3% year-over-year to $32.29 million. Its loss from operations amounted to $31.80 million. The company’s net loss rose 2.4% from the prior year to $31.77 million, while its net loss per share stood at $1.06.
TFFP’s revenue is expected to decline 11% year-over-year to $60 thousand in the fiscal first quarter that ended March 2023. Its EPS is expected to come in at negative $0.22 for the same quarter.
The stock has declined 90.6% over the past year and 21.6% over the past month to close the last trading session at $0.65. Its 60-month beta is 1.21.
This grim prospect is reflected in TFFP’s POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system.
TFFP also has a D grade for Value, Momentum, and Quality. The stock is ranked #307 among 389 stocks in the F-rated Biotech industry.
TFFP ratings for Growth, Stability, and Sentiment can be accessed here.
National CineMedia, Inc. (NCMI)
NCMI operates cinema advertising network in North America through its subsidiary, National CineMedia, LLC.
NCMI’s forward EV/Sales of 4.92x is 165% higher than the industry average of 1.86x. Its forward EV/EBIT of 186.29x is significantly higher than the industry average of 16.23x.
NCMI’s trailing-12-month negative EBITDA and net income margin of 3.81% and 11.86% are remarkably lower than the industry average of 18.02% and 3.38%. Its trailing-12-month gross profit margin of 46.52% is 7.4% lower than the industry average of 50.22%.
NCMI’s operating expenses came in at $58.7 million for the third quarter that ended September 29, 2022, up 16.5% year-over-year. Its adjusted loss per share amounted to $0.13. Its current liabilities came in at $290.20 million, compared to $69.8 million in the previous period.
The EPS is expected to amount to a negative $0.29 in the fiscal year 2023. It missed EPS estimates in three out of four trailing quarters.
The stock has lost 94.4% over the past year to close the last trading session at $0.14. It has declined 39.1% over the past month. Its 24-month beta is 1.52.
It is no surprise that NCMI has an overall D rating, which equates to a Sell in our POWR Ratings system.
It also has an F grade for Stability and Sentiment. It is ranked #5 among six stocks in the F-rated Entertainment - Movies/Studios industry.
To see additional POWR Ratings for Growth, Value, Momentum, and Quality for NCMI, click here.
Consider This Before Placing Your Next Trade…
We are still in the midst of a bear market.
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NVCN shares were unchanged in premarket trading Wednesday. Year-to-date, NVCN has gained 87.84%, versus a 7.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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