Market experts are bearish about this earnings season amid the still high inflation and recession concerns. I think it is wise to steer clear of fundamentally weak stocks Tattooed Chef (TTCF), Trilogy Metals (TMQ), and Aptinyx (APTX), which are due to report earnings soon. Keep reading.
The optimism seen at the beginning of this year, fueled by unexpected robust data, has faded away. Moreover, the recent turbulence in the banking sector has eroded the confidence of investors and businesses.
Amidst high inflation and recessionary warnings, corporate earnings might take a hit this season. In this article, I will explore Tattooed Chef Inc. (TTCF), Trilogy Metals Inc. (TMQ), and Aptinyx (APTX) and discuss why investors should steer clear of these stocks as they near their earnings releases.
The Commerce Department reported that the Personal Consumption Expenditures (PCE) price index, excluding food and energy, increased by 0.3% in February. Moreover, personal income rose 0.3%, slightly above the 0.2% estimate, and consumer spending climbed 0.2%.
Additionally, projections issued by Fed policymakers at their last meeting indicated rates would rise further. The projections also include a potential increase in the unemployment rate from the current 3.8% to 4.5% by the year’s end, as well as a typical economic growth slowdown.
Furthermore, ahead of the earning season, veteran economist David Rosenberg warned that corporate profits are shrinking, which is bad news for the stock market.
He said that as shares are typically valued at a multiple of a company’s profits, a slide in earnings could pull down stock prices. It’s also a classic sign of an oncoming economic downturn, as weakening corporate finances suggest demand is falling and growth is likely slowing.
Take a detailed look at the stocks mentioned above:
Tattooed Chef Inc. (TTCF)
TTCF produces and sells plant-based frozen meals. The company offers products under the Tattooed Chef and private label brands.
TTCF’s trailing-12-month gross profit margin of 0.16% is 99.5% lower than the 31.37% industry average. Its trailing-12-month negative net income margin of 42.48% is lower than the 3.68% industry average.
Moreover, its trailing-12-month negative ROCE, ROTC, and ROTA of 53.71%, 27.01%, and 40.26% are lower than the industry averages of 10.56%, 6.32%, and 4.17%, respectively.
During the fiscal third quarter that ended November 30, 2022, TTCF’s revenue declined 6.7% year-over-year to $54.12 million. Its gross loss came in at $3.90 million, compared to a $4.96 million gross profit in the prior-year quarter. Its adjusted EBITDA decreased 395.8% year-over-year to negative $25.50 million.
Additionally, the company’s net loss rose 368.7% year-over-year to $38.50 million, while the loss per share grew 360% year-over-year to $0.46.
TTCF’s EPS is expected to decline 93.9% year-over-year to negative $0.31 in its fiscal fourth quarter that ended December 2022. It has failed to surpass the consensus EPS estimates in each of the trailing four quarters, which is disappointing.
The stock has declined 88.7% over the past year to close the last trading session at $1.42. Its 24-month beta is 1.20.
TTCF’s POWR Ratings reflect its bleak outlook. The stock has an overall F rating, which equates to a Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
TTCF also has an F grade for Growth, Stability, Sentiment, and Quality. The stock is ranked #81 stocks in the 82-stock Food Makers industry.
TTCF ratings for Value and Momentum can be accessed here.
Trilogy Metals Inc. (TMQ)
TMQ is a base metals exploration company that explores and develops mineral properties in the U.S. The company is headquartered in Vancouver, Canada.
TMQ’s trailing-12-month negative ROCE, ROTC, and ROTA of 15.58%, 2.74%, and 16.61% compare with their respective industry averages of 11.69%, 6.89%, and 5.40%.
TMQ’s comprehensive loss grew 12% year-over-year to $24.26 million in the fiscal year that ended November 30. Its loss per common share rose 13.3% from the prior year to $0.17. The company’s cash and cash equivalents amounted to $2.57 million, compared to $6.31 million in 2021.
TMQ’s loss per share is expected to be $0.01 for the fiscal first quarter that ended February 2023. The company has failed to surpass the consensus EPS estimates in each of the trailing four quarters.
The stock has declined 49.2% over the past year, closing the last trading session at $0.53. It has declined 29.6% over the past nine months. It has a 24-month beta of 1.27.
This grim prospect is reflected in TMQ’s POWR Ratings. The stock has an overall D rating, equating to a Sell in our proprietary rating system.
TNQ has an F grade for Value and a D for Momentum and Quality. It is ranked #32 among 36 stocks in the Industrial – Metals industry.
Click here to see the additional POWR Ratings for TMQ (Growth, Stability, and Sentiment).
Aptinyx (APTX)
APTX is a biopharmaceutical company that discovers, develops, and commercializes synthetic molecules to treat disorders that impact the nervous system and brain.
APTX’s trailing-12-month negative ROCE, ROTC, and ROTA of 97.49%, 45.44%, and 97.25% are lower than the industry averages of 40.21%, 21.80%, and 31.63%, respectively.
During the fourth quarter that ended December 31, 2022, APTX’s loss from operations amounted to $11.43 million. Its net loss came in at $12.05 million. The company reported a net loss per share of $0.18.
Moreover, cash and cash equivalents stood at $56.20 million on December 31, 2022, compared to $106.10 million on December 31, 2021.
Analysts expect APTX’s loss per share for the first quarter that ended March 2023 to be $0.17. Its loss per share is expected to be 0.40 for the fiscal year 2023. The company is expected to report no revenue this year.
APTX has plummeted 94.5% over the past year to close its last trading session at $0.12. It has declined 36.3% over the past three months. The stock’s 60-month beta is 1.39.
It is no surprise that APTX has an overall D rating, which translates to a Sell in our POWR Rating system.
The stock also has a D grade for Value and Momentum. Among the 172 stocks in the F-rated Medical – Pharmaceuticals industry, it is ranked #113.
Beyond what we’ve stated above, we have also given APTX grades for Growth, Stability, Sentiment, and Quality. Get all the APTX ratings here.
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TTCF shares were unchanged in premarket trading Monday. Year-to-date, TTCF has gained 15.45%, versus a 7.46% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor’s degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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