2 rotten stocks to sell now before they go bad more
Given the uncertain macroeconomic environment and continued inflation, fundamentally weak food stocks BRC (BRCC) and Save Foods (SVFD) are expected to remain under pressure. Therefore, it may be best to steer clear of these stocks. Keep reading.
Headwinds from persistently high inflation, tight monetary policy and concerns about a looming recession have put pressure on industries. With food companies expected to face margin pressure from rising raw material costs, investors may want to look to sell off fundamentally weak food stocks BRC Inc. (BRCC) and Save Foods, Inc. (SVFD) before they spoil further.
Although the latest CPI report signaled a cooling in inflation, it still remains well above the Federal Reserve’s target of 2%. a strong job growth in March and high inflation is likely to lead to further rate hikes by the Federal Reserve, heightening fears that the economy will slide into recession.
In addition, Cleveland Fed president Loretta Mester has said that interest rates will have to rise above 5% given the high prices. With recession fears weighing heavily on investor sentiment, it may be best to avoid BRCC and SVFD. While food stocks are generally recession-proof, the weak fundamentals of these stocks could lead to downward price pressures.
BRC Inc. (BRCC)
BRCC buys, roasts and sells coffee, coffee accessories and designer clothing in the United States. The company also produces media content; podcasts; and digital and print magazines, and sells coffee making equipment and outdoor and lifestyle equipment.
In terms of EBIT margin over the last 12 months, BRCC’s negative 22.49% compared to the industry average of 7.64%. The return on total capital over 12 months of negative 41.11% million is comparable to the industry average of 6.42%. Similarly, the negative is 40.52% after 12 months Levered FCF margin compared to the industry average of 2.69%.
For the fiscal fourth quarter ended December 31, 2022, BRCC’s operating loss increased 378.3% year over year to $19.46 million. Net loss increased 334.8% year over year to $20.03 million. In addition, year-over-year adjusted EBITDA loss increased significantly to $11.42 million, while net loss per share came in at $0.09.
Over the past year, the stock is down 65.1% to close out its last trading session at $5.21.
BRCC’s weak fundamentals are reflected in its POWR ratings. The stock has an overall rating of F, which translates to strong selling in our proprietary rating system. The POWR Ratings rate stocks on 118 different factors, each with its own weighting.
It ranks number 77 out of 79 stocks in the Food makers industry. It has an F grade for quality and a D for stability and sentiment.
We also provided BRCC numbers for growth, value and momentum. Get all BRCC ratings here.
Save Foods Inc. (SVFD)
Headquartered in Hod HaSharon, Israel, SVFD develops and markets eco-friendly green treatments for the food industry to improve food safety and shelf life of fresh produce.
In terms of returns on common stocks over 12 months, SVFD’s negative 93.10% compares to the industry average of 11.44%. The return on total capital over 12 months of negative 58.69% is comparable to the industry average of 6.81%. Similarly, the negative return on total assets of 88.41% over 12 months is comparable to the industry average of 5.21%.
SVFD revenue from product sales for the fiscal year ended December 31, 2022 declined 10.1% year over year to $394,000. The company’s operating loss increased 23.7% year over year to $5.82 million. Net loss attributable to shareholders of the company increased 19.1% year over year to $5.74 million. In addition, loss per share fell 20.4% year over year to $1.64.
Over the past year, the stock is down 85.6% to close out its last trading session at $0.75.
SVFD’s POWR ratings reflect the bleak outlook. The stock has an overall rating of F, which equates to strong selling in our proprietary rating system.
It ranks #78 in the same industry. In addition, it has an F rating for value and stability and a D rating for quality.
To see SVFD’s additional assessments for growth, momentum and sentiment, click here.
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BRCC Shares. Year-to-date, BRCC is down -14.73%, versus a 9.17% increase in the benchmark S&P 500 index over the same period.
About the author: Malaika Alphonsus
Malaika’s passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in economics and psychology, she wants to help investors make informed investment decisions.
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