Amid the Fed’s monetary tightening policies, industrial production in the U.S. declined in October. However, the infrastructure bill, which has already approved numerous projects for industrial development, is expected to boost the sector. Given the industry’s growth prospects, investors could consider buying quality industrial equipment stock LSI Industries (LYTS). However, fundamentally weak Volta (VLTA) might be best avoided now. Keep reading….
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Amid consecutive federal rate hikes, U.S. industrial production declined in October. However, manufacturing output increased marginally. On top of it, real gross domestic product (GDP) increased at an annual rate of 2.9% in the third quarter of 2022
Moreover, the Bipartisan Infrastructure Law is expected to fortify industrial development in the country. To date, 2,800 bridge repair and replacement projects have been announced under the infrastructure bill.
Also, several plans have been approved for water funding, EV charging networks, and high-speed internet deployment, which should bode well for the industrial equipment sector.
Furthermore, according to Research and Markets, the commercial and industrial machinery and equipment repair and maintenance market is projected to grow at a CAGR of 12.7% until 2026.
Therefore, quality industrial equipment stock LSI Industries Inc. (LYTS) could be an ideal buy now. However, fundamentally weak Volta Inc. (VLTA) might be best avoided.
Stock to Buy:
LSI Industries Inc. (LYTS)
LYTS produces and sells non-residential lighting and retail display solutions in the United States, Canada, Mexico, Australia, and Latin America. It operates in two segments, Lighting and Display Solutions.
On October 18, 2022, LYTS announced the launch of REDiMount, a new lighting solution with a never-seen-before mounting and installation system for refueling station canopies. The new product addition is expected to enhance LYTS’ existing portfolio.
For its fiscal 2023 first quarter that ended September 30, 2022, LYTS’ net sales came in at $127.07 million, up 19.4% year-over-year. Its adjusted net income came in at $7.08 million, up 99.9% year-over-year, while its adjusted EPS came in at $0.25, up 92.3% year-over-year.
Analysts expect LYTS’ revenue to increase 7.5% year-over-year to $489.05 million in 2023. Its EPS is expected to increase 28.1% year-over-year to $0.82 in 2023. It surpassed EPS estimates in all four trailing quarters. The stock has gained 75.1% year-to-date to close the last trading session at $12.01.
LYTS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
LYTS has an A grade for Sentiment and a B for Growth, Value, and Quality. It is ranked first among 88 stocks in the B-rated Industrial – Equipment industry. Click here for the additional POWR Ratings for Momentum and Stability for LYTS.
Stock to Avoid:
Volta Inc. (VLTA)
VLTA operates a network of intelligent media-enabled charging stations for electric vehicles in the United States.
On November 25, 2022, the New York Stock Exchange (NYSE) sent a notice to VLTA stating that its Class A Common Stock failed to comply with the NYSE’s continued listing standard as its average closing price was less than $1.00 for 30 consecutive trading days.
Moreover, VLTA’s forward EV/Sales of 3.38x is 211% higher than the industry average of 1.09x. Its forward Price/Sales of 1.47x is 66.8% higher than the 0.88x industry average.
VLTA’s total operating revenue came in at $14.36 million for the third quarter that ended September 30, 2022, up 69.1% year-over-year. However, its product revenue came in at $124,000, down 66.7% year-over-year.
Also, its cash and cash equivalents came in at $15.65 million for the period ended September 30, 2022, compared to $262.26 million for the period ended December 31, 2021.
The stock has lost 92.8% year-to-date to close the last trading session at $0.53.
VLTA’s POWR Ratings reflect its poor prospects. The stock has an overall F rating, equating to a Strong Sell. It has an F grade for Stability and Quality and a D for Sentiment. VLTA is ranked #77 in the same industry.
Click here to access the additional POWR Ratings for VLTA (Growth, Value, Momentum).
LYTS shares were unchanged in premarket trading Friday. Year-to-date, LYTS has gained 79.44%, versus a -13.24% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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