3 Stocks to Consider as Major Indexes Struggle to Gain Traction

The S&P 500 struggled to gain traction today as investors have contended with a mixed bag of results from the recent slate of quarterly performances, which have spurred uncertainty about the economic outlook of the country. The DJIA is down over 0.3%, the S&P 500 is in a gridlock, down 0.03%, and the NASDAQ Composite is up about 0.5%. Twitter TWTR, 3M MMM, Ford F and eBay EBAY all saw their respective shares decline after they reported disappointing results.

Despite the mixed results from the corporate profit reports, the number of weekly jobless reports unexpectedly fell last week. The report slightly eases the worry about the trajectory of the domestic economy as the job market remains solid despite decelerating economic growth. With speculation running rampant about the economy and earnings failing to provide a definitive diagnosis, investors have also grown uncertain about overvalued stocks. Let’s take a look at a few stocks trading at a moderate forward multiple that investors can consider.

Tenet HealthcareTHC is an investor-owned health care services company, which owns and operates general hospitals and related health care facilities for urban and rural communities in numerous states, and has offices in CA and FL. The health care company has seen its shares grow 44.8% in 2019, easily outpacing the broader medical care market’s 9.1% loss YTD.

The stock is currently trading around 10X its forward earnings, which is below the average forward multiple the industry average is trading at. Looking at our Q4 consensus figures for the company, estimates call for earnings to soar 101.96% to $1.03 per share and for sales to pop 1.65% to $4.7 billion. Tenet announced in July the spin-off of its Conifer business as an independent publicly traded company and is likely to use the proceeds of this transaction to pay down its debt load. THC sits at a Zacks Rank #1 (Buy).

Mas TecMTZ is a leading infrastructure construction company operating mainly throughout North America. The company engages in the engineering, building, installation, and other infrastructure. The construction company has seen its shares rise roughly 60% and the company belongs to the heavy construction industry, which ranks in the top 22% of our Zacks Industry Rank.

The stock currently trades at 13X its forward earnings, just barely over the industry average of 12X forward earnings. Our current quarter estimates forecast the firm to see bottom-line growth of 23.31% to $1.64 per share while sales grow 9.26% to $2.16 billion. The company boasts an average EPS surprise of 21.7% over the last four quarters and is listed as a Zacks Rank #1 (Strong Buy).

Sonic AutomotiveSAH is one of the leading automotive retailers in the United States. The automotive retailer released its third quarter results before the opening bell on Thursday; revenue and earnings surged 67.9% and 83.3%, respectively. The impressive quarterly report sent the stock soaring over 8% to hit a new 52-week high. Sonic Automotive has seen its stock skyrocket 143.4% in 2019 thus far as its EchoPark pre-owned vehicle chain is growing substantially and could significantly improve the company's profitability.

The retailer began 2019 trading around 8X its forward earnings and now trades around 13X. Its current forward multiple is slightly above the industry average of 11X forward earnings but still provides a solid entry point for a stock that looks poised to continue its remarkable run after its latest quarterly report. Our full fiscal 2019 estimates for SAH project earnings to surge 32.77% to $2.35 per share while sales reach $10.36 billion for a 4.14% leap. SAH boasts a Zacks Rank #1 (Strong Buy) as its earning estimate revisions have trended higher for Q4 and beyond.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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