Moderating inflation and a better-than-expected GDP report could bode well for the stock market in the near term. However, amid recession worries, it would be wise if inexpensive quality penny stocks Overseas Shipholding Group (OSG), ARC Document Solutions (ARC), and Data Storage Corporation (DTST) could be added to your portfolio in February. Read on….
According to the Commerce Department, the U.S. economy expanded for the fourth quarter of last year at a 2.9% annualized pace, higher than the Dow Jones analysts’ estimate of 2.8%.
In addition, the December CPI moderated for the sixth consecutive time, rising 6.5% year-over-year. Although investors are optimistic about this data, recession fears remain mixed as they focus on monetary policy and the upcoming Fed decision.
A “soft landing” scenario seems to be standing on shaky ground. Gregory Daco, the chief economist at EY-Parthenon consulting group, anticipating a recession, commented, “So across the economy there are more indications that the economy is slowing down materially, and that’s typically the sign of the onset of a recession.”
Although penny stocks are usually associated with volatility, against this backdrop, investors could scoop up inexpensive stocks that have the potential to grow over time. Hence, fundamentally sound penny stocks Overseas Shipholding Group, Inc. (OSG), ARC Document Solutions, Inc. (ARC), and Data Storage Corporation (DTST) might be solid buys this month.
Overseas Shipholding Group, Inc. (OSG)
OSG is the owner and operator of a fleet of oceangoing vessels engaged in transporting crude oil and petroleum products in the U.S. flag trade. The company serves independent oil traders, refinery operators, and government entities.
On December 8, 2022, OSG announced that it had exercised options to extend its six bareboat charter agreements with American Shipping Company ASA for an additional three-year term commencing in December 2023.
“We believe the market continues to support attractive commercial opportunities for these vessel leases to supplement the strong and stable cash flow generation from our niche businesses,” said Sam Norton, OSG’s President and CEO.
On November 15, 2022, the company’s Board of Directors announced the purchase of $5 million shares of its common stock from Cyrus Capital at $2.86 per share. The price paid in this share purchase equates to an enterprise value of roughly 4.5 times the expected adjusted EBITDA for 2022, an implied valuation considered very attractive for OSG.
In terms of trailing 12-month EV/Sales, OSG is trading at 1.77x, 8.6% lower than the industry average of 1.93x. Its trailing 12-month Price/Sales multiple of 0.74 is 44.1% lower than the industry average of 1.32.
OSG’s shipping revenues increased 30.9% year-over-year for the third quarter that ended September 30, 2022, to $123.06 million. The company’s net income came in at $13.25 million, compared to a net loss of $16.01 million in the year-ago period. Also, its EPS came in at $0.15, compared to a loss per share of $0.18 in the prior-year period.
Over the past six months, the stock has gained 59.4% to close the last trading session at $3.73. Over the past month, it has gained 29.1%. OSG is currently trading higher than its 50-day and 200-day moving averages of $3.09 and $2.69, respectively, indicating an uptrend.
OSG’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Momentum and Quality and a B for Growth, Value, and Sentiment. In the 46-stock A-rated Shipping industry, it is ranked first.
Click here to see the additional ratings of OSG for Stability.
ARC Document Solutions, Inc. (ARC)
Digital printing company ARC provides digital printing and document-related services in the United States. It provides managed print services, cloud-based document management software, and other digital hosting services.
ARC’s trailing-12-month EV/Sales of 0.69x is 60.8% lower than the industry average of 1.77x, while its trailing-12-month Price/Sales of 0.49x is 63.6% lower than the industry average of 1.35x.
Its trailing-12-month gross profit margin of 33.20% is 14.5% higher than the industry average of 28.99%. Also, its trailing-12-month EBITDA margin of 13.68% is 5.4% higher than the industry average of 12.98%.
On December 8, 2022, ARC announced it would pay a dividend of $0.05 per share on February 28, 2023. This reflects the shareholder return ability of the company.
ARC’s net sales increased marginally year-over-year to $73.10 million for the third quarter that ended September 30, 2022. Its adjusted net income came in at $3.70 million, up 15.6% year-over-year, while its EPS came in at $0.09, representing an increase of 12.5% year-over-year.
Over the past six months, the stock has gained 24.2% to close the last trading session at $3.49. Moreover, it has gained 44.2% over the past three months. It is trading higher than its 50-day and 200-day moving averages of $3.05 and $2.90, respectively.
ARC’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to a Strong Buy in our proprietary rating system.
Also, the stock has an A grade for Value, Sentiment, and Quality. Within the B-rated Outsourcing – Business Services industry, it is ranked first among 42 stocks.
Click here for the additional POWR Ratings of ARC (Growth, Momentum, and Stability).
Data Storage Corporation (DTST)
DTST provides multi-cloud information technology solutions in the United States. The company offers data protection and disaster recovery solutions, high availability, data vaulting, DRaaS, IaaS, message logic, standby server, support, maintenance, and internet solutions.
On October 24, 2022, DTST announced that its CloudFirst and Nexxis divisions had been ISO/IEC 27001:2013 certified. This certification illustrates that DTST met rigorous international standards, demonstrating the company’s efficiency.
DTST’s forward EV/Sales of 0.10x is 96.5% lower than the industry average of 2.85x, while its forward Price/Sales of 0.50x is 82.6% lower than the industry average of 2.89x.
DTST’s sales came in at $4.42 million for the third quarter that ended September 30, 2022, up 14.5% year-over-year. Its gross profit came in at $1.85 million, up 20.1% year-over-year. Its adjusted EBITDA rose 54.7% from its prior-year quarter to $162.39 thousand.
Analysts expect DTST’s revenue and EPS to come in at $6.40 million and $0.01, respectively, for the fiscal first quarter ending March 2023. It surpassed EPS estimates in three of the four trailing quarters, which is impressive.
DTST has gained 17.6% over the past month and 1.2% intraday to close the last trading session at $1.74. It is trading higher than its 50-day moving average of $1.71.
It is no surprise that DTST has an overall B rating, which equates to Buy in our POWR Ratings system.
It has an A grade for Sentiment and a B for Value and Quality. It is ranked #6 in the 66-stock Internet industry.
To see the additional POWR Ratings for Growth, Momentum, and Stability for DTST, click here.
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OSG shares were unchanged in premarket trading Wednesday. Year-to-date, OSG has gained 29.07%, versus a 6.29% 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.
This content was originally published here.
