As part of every earnings season, the stock market knocks some stocks down onto the discount rack. Sometimes this is justified due to a company’s underperformance, poor outlook, or a dividend cut. Other times, the market focuses on the wrong metrics and misprices a top stock. That’s the time for savvy investors to go bargain shopping.
Two stocks in bargain territory after their most recent earnings reports are…
iRobot (NASDAQ:IRBT) and Apache Corporation (NYSE:APA).
Managing expectations
Robotic vacuum manufacturer iRobot saw its shares tumble by 22% after it reported a decline in earnings and quarterly revenue that didn’t live up to Wall Street’s expectations. Analysts had been forecasting Q1 2019 revenue of $251.4 million, which would have been a year-over-year increase of 15.3%. iRobot actually posted revenue of $237.7 million, a 9% increase over the prior-year quarter.
If that doesn’t sound like much of a miss to justify a more-than-20% sell-off, you’re right, especially when you consider that per-share earnings beat Wall Street’s expectations by 66.1%. True, adjusted earnings were down 15% from the prior year, and operating expenses were up 7%, but that’s hardly surprising considering the company is investing heavily in research and development right now as it prepares to launch a robotic lawn mower and an as-yet-unnamed mystery product in Q2.
Certainly, iRobot’s management didn’t seem fazed by the quarter’s performance. iRobot doesn’t give quarterly guidance, so there isn’t a hard number that we can use as a benchmark, but on the earnings call, CFO Alison Dean indicated that the quarter was more or less in line with expectations, and CEO Colin Angle increased the company’s guidance for 2019 earnings per share while reaffirming revenue and operating income expectations.
So, the company’s hot prospects haven’t changed, but the price hit has knocked its valuation way down. The company’s P/E ratio is just 28.3, near a two-year low. Now’s a great time to buy this great growth stock at a bargain basement price.
A bet on a recovery
Unlike iRobot, whose shares have been trending higher and higher over the last few years, oil and gas driller Apache Corporation’s shares have…
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