The high rate of inflation has created waves across the livelihoods of Americans, with many paying higher prices for almost everything. This has created losses for many companies as people have scaled back on their spending of non-essentials drastically.
According to the latest November reading, the producer price index, a measure of the costs domestic producers incur for goods and services, rose 9.6% year over year. The consumer price index- a measure of the prices shoppers pay for products, increased 6.8% during the same period.
These figures mean many producers found themselves in a situation where they had to absorb rising input costs, resulting in lower earnings and narrower profit margins. High inflation separates the wheat from the chaff- businesses with a strong competitive edge and strong pricing power can raise their prices and essentially transfer the cost to customers.
This list consists of stocks currently trading more than 20% below their 52-week highs, which is a sign that there might be a rebound soon to follow. One of the stocks in this category is Under Armour (ticker: UAA), the sports apparel retailer whose net sales grew by 8% from the year-ago period to reach $1.5 billion.
However, Under Armour’s net income has risen from $39 million to $113 million this last year, an indication that the company was able to significantly strengthen its profitability despite its consumer activity and revenue remaining relatively stable. Its net margin has increased from 2.7% to 7.3%, and its gross margin has risen to 51%.
These stocks fall under the same bracket and have expanded their profit margins last year but are trading at a discount from their 52- week highs.
|Company / Ticker||Sector||2021 Q3 Net Margin||2020 Q3 Net Margin||2019 Q3 Net Margin||Current Price / 52W High||Price / Earnings|
|Charter Communications / CHTR||Telecom||9.3||6.8||3.4||77%||28.2|
|DISH Network / DISH||Telecom||12.5||11.1||11.2||70||8.6|
|Leidos / LDOS||Industrials||5.9||5.0||5.7||80||13.7|
|Lumen Technologies / LUMN||Telecom||11.1||7.1||5.6||78||6.7|
|Mohawk Industries / MHK||Materials||9.6||8.0||6.2||78||12.2|
|Netflix / NFLX||Technology||19.4||12.3||12.7||79||51.6|
|PTC / PTC||Technology||60.9||13.7||2.9||76%||27.2|
|Qorvo / QRVO||Technology||25.4||12.9||10.3||79||13.3|
|AT&T / T||Telecom||14.8||6.7||8.3||77||7.7|
|Under Armour / UAA||Consumer Cyclicals||7.3||2.7||7.2||76||27.4|
|Viatris / VTRS||Healthcare||6.9||6.2||6.4||77||3.9|
Other companies have margins less affected by rising input costs because their products or services rely on existing infrastructure, intellectual properties, or platforms. Examples of these include telecommunications giants AT&T (ticker: T), Charter Communications (ticker: CHTR) and Dish Network (ticker: DISH). The list is further expanded by companies like the video-streaming platform Netflix (ticker: NFLX), software company PTC (ticker: PTC), Leidos (ticker: LDOS), Lumen Technologies (ticker: LUMN), Mohawk Industries (ticker: MHK), Qorvo (ticker: QRVO) and Viatris (ticker: VTRS).