Amid macroeconomic turmoil and market volatility, it might be wise to invest in ChampionX Corporation (CHX) and Consolidated Water Co. Ltd. (CWCO), which have gained strong momentum and are well-positioned to maintain it.
Despite the increased risk of a recession later this year, the Federal Reserve is likely to hike interest rates at their next meeting to bring inflation down to its target level and tight labor markets.
According to Bankrate’s quarterly survey of analysts, the US economy started the year stronger than projected, but the risks of a recession remain high.
According to experts’ consensus, the financial system has a 64% likelihood of declining by the end of 2023. Those odds were unchanged from the previous survey period, despite a large increase in employment by firms since the last iteration of Bankrate’s Economic Indicator survey.
ChampionX Corporation (CHX)
CHX provides chemistry solutions and engineered equipment and technologies to oil and gas companies worldwide. The company operates through four segments: Production Chemical Technologies; Production & Automation Technologies; Drilling Technologies; and Reservoir Chemical Technologies.
CHX’s forward EV/Sales multiple of 1.44 is 19.5% lower than the industry average of 1.79.
In terms of trailing-12-month CHX’s ROTC of 10.92% is 9.3% higher than the 9.99% industry average. Likewise, its trailing-12-month levered FCF margin of 15.04% is 120.8% higher than the industry average of 6.81%.
For the first quarter that ended March 31, 2023, CHX’s revenues increased 9.5% year-over-year to $948.35 million. Its net income increased 73.1% year-over-year to $63.53 million. Furthermore, its EPS came in at $0.31, representing a 72.2% increase from the prior-year quarter.
The consensus revenue estimate of $4.04 billion for the year ending 2023 represents a 6% increase year-over-year. Its EPS is expected to grow 46.4% year-over-year to $1.85 in 2023. It has surpassed EPS estimates in all four trailing quarters. The stock has gained 33.6% over the past nine months to close its last trading session at $27.19, above its 200-day moving average of $26.36.
It’s no surprise that CHX has an overall B rating, equating to a Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has an A grade for Momentum and B grade for Growth and Quality. It is ranked five out of 43 stocks in the B-rated Energy – Services industry. To access additional ratings for CHX’s Value, Stability, and Sentiment, click here.
Consolidated Water Co. Ltd. (CWCO)
Headquartered in Grand Cayman, the Cayman Islands, CWCO together with its subsidiaries, designs, constructs, manages, and operates water production and water treatment plants primarily in the Cayman Islands, the Bahamas, and the United States. The company operates through four segments: Retail; Bulk; Services; and Manufacturing.
CWCO’s forward EV/Sales multiple of 1.78 is 54.4% lower than the industry average of 3.90. Its forward EV/EBITDA multiple of 9.57 is 15.7% lower than the industry average of 11.35.
In terms of trailing-12-month CWCO’s levered FCF margin of 13.96% is higher than the negative 11.48% industry average. Likewise, its trailing-12-month asset turnover ratio of 0.51x is 115.2% higher than the industry average of 0.24x.
CWCO’s revenues increased 71% year-over-year to $28.40 million, for the fourth quarter that ended December 31, 2022. Its retail revenue grew 25% from its year-ago value to $6.80 million. The company’s service revenue came in at $10.30 million, an increase of 206% year-over-year.
Street expects CWCO’s revenue to increase 34.3% year-over-year to $126.35 million in 2023. Its EPS is estimated to increase 155.3% year-over-year to $0.97 in 2023. Over the past year, the stock has gained 57.9% to close the last trading session at $16.85, above its 100-day moving average of $15.30.
CWCO’s POWR Ratings reflect its solid prospects. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
It also has an A grade for Momentum and a B grade for Growth and Value. Within the Water industry, it is ranked first among 12 stocks. Click here to see the additional ratings for CWCO (Stability, Sentiment, and Quality).
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CHX shares were trading at $26.86 per share on Thursday afternoon, down $0.33 (-1.21%). Year-to-date, CHX has declined -6.82%, versus a 7.84% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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