4 Stocks Hitting 52-Week Lows Worth a Second Look

On Tuesday, 100 Nasdaq stocks hit 52-week lows, 24 more than Nasdaq stocks hitting 52-week highs. That compares to 81 NYSE stocks hitting 52-week highs and 47 hitting 52-week lows. 

Four of the 100 Nasdaq stocks hitting 52-week lows are worth a second look for investors interested in buying on the dip. 

Wendy’s 

Wendy’s (WEN)hit its 24th low of the past 52 weeks on Tuesday. Its stock is down 22% over the past year and 6% over the past five years. It’s clearly not the top fast food stock available. 

However, except for its low during the March 2020 correction, the bottom appears to be around $17, so the risk/reward proposition is tilted your way. 

While its Q1 2024 results weren’t off-the-charts good, they weren’t a disaster either. Its same-restaurant sales grew 0.6% in the U.S., 3.2% internationally, and 0.9% overall. Its adjusted net revenue increased 0.6% to $429.8 million, while its adjusted EBITDA rose 1.8% to $127.8 million, a healthy 29.7% margin. 

In 2024, it expects 5.5% global systemwide sales growth with an adjusted EBITDA of $540 million. Its free cash flow estimate for 2024 is $285 million, which means its free cash flow yield is around 4%. I consider anything between 4% and 8% as fair value. 

To protect your downside, buy 100 shares and sell one July 19 $16 put with 51 days to expiration. The ask price of $0.20 is just 1.3% of the strike price. Alternatively, the July 19 $17 strike has an ask price of $0.50, a 2.9% down payment.    

Amerisafe 

Amerisafe (AMSF)hit its 18th low of the past 52 weeks on Tuesday. Its stock is down 15% over the past year and 27% over the past five years. 

Amerisafe is a specialty provider of workers’ compensation insurance for small and medium-sized businesses. 

The company reported Q1 2024 results in April. They were as expected, with a 1.1% drop in net premiums earned to $68.4 million and a 17.0% decline in operating income to $13.3 million. 

“While soft market conditions are ongoing and competition remains robust, loss costs continue to decline. We are pleased to report an 87.3% combined ratio in the quarter through disciplined underwriting practices, modest policy growth, and favorable case loss development from prior accident years,” stated CEO Janelle Frost. 

Despite the year-over-year drop in gross premiums written and net premiums earned, it generated a net combined ratio of 87.3%. Anything under 100% means it generated an underwriting profit in the quarter. 

As Frost said in its Q1 2024 conference call, it continues to retain most of its customers. Of the policies up for renewal, Amerisafe retained 94.9%. 

While competition is considerable, it generates 43% of its premiums from customers spending less than $35,000 in annual premiums per policy. That puts it up against small competitors who write policies in single states. 

Amerisafe shares trade at levels not seen since 2015. It yields 3.4%.

MGP Ingredients 

MGP Ingredients (MGPI)hit its 14th low of the past 52 weeks on Tuesday. Its stock is down 21% over the past year and up 27% over the past five years, considerably lower than the 91.5% 

return for the S&P 500. 

The company started life in 1941 as an alcohol supplier to other businesses. It added food ingredients such as specialty wheat starches and proteins along the way. The big move came in 2021 when it acquired Luxco for $296 million in cash and stock. 

That acquisition created a third segment, Branded Spirits. It sells products focused on the entire price-point spectrum, from ultra-premium brands such as Yellowstone Kentucky Straight Bourbon Whiskey and Rebel 10 Year Single Barrel Kentucky Straight Bourbon Whiskey to value brands such as Canada House Canadian Whisky. 

In Q1 2024, Distilling Solutions accounted for 50% of its $170.6 million in revenue, Branded Spirits (29%), and Ingredient Solutions (21%). Unfortunately, pre-tax profits were 34% lower over Q1 2023 at $26.8 million. 

The first quarter's revenue decline was mainly due to the closure of its distillery in Atchison, Kansas. The distillery produced grain-neutral spirits and industrial alcohol products, which have flooded markets in recent years, putting downward pressure on revenues and profitability. 

With long-term debt less than 19% of its market cap, it has plenty of liquidity to make more premium-priced branded spirits acquisitions in 2024 and beyond. 

Lululemon 

Lululemon (LULU)hit its 8th low of the past 52 weeks on Tuesday. Its stock is down 11% over the past year and up 81% over the past five years, lower than the 91.5% 

return for the S&P 500. 

No matter how long you’ve owned LULU stock, it’s fair to say you haven’t experienced this kind of downdraft since 2021, when it lost 44% of its value between October 2021 and July 2022. It currently trades $30 higher than its July 2022 lows. 

The concern is that Lululemon’s lost its mojo, which happens to market leaders occasionally. Some analysts remain on board the LULU story—26 analysts cover its stock, with 19 rating it a Buy (4.23 out of 5) with a $458.85 target price—while others, like Jefferies analyst Randy Konik, believe its business is headed for a big fall. 

Konik said on CNBC on May 21 that Lululemon is facing several headwinds, making it more challenging to keep growing. Whether it’s changing consumer trends, as buyers opt for baggier pants, to higher competition in the athleisure space from companies such as Alo Yoga and Vuori, or the company faces tougher comps against previous quarters, it will be much harder for LULU to impress investors and that’s showing in its losses year to date, down 41%. 

In April, Konik lowered his price target by 20% to $240 while maintaining his Underperform rating on the stock. The company reports its Q1 2024 results on June 5. Since reporting its Q4 2024 results in March, its shares have taken a beating. 

Two things to remember: Konik has been a LULU bear for as long as I can remember, probably dating back a decade or more. Secondly, the apparel industry has always moved between the popularity of jeans and other types of pants, such as those produced by Lululemon. It could be that the company is in the middle of such a trend transition by consumers. If so, Konik’s not wrong to suggest its business faces an uphill battle.

In the long term, however, I don’t see the company failing to counter the issues it sees in the marketplace, which is holding back its revenue growth. If there’s one positive about the company, it is that it listens to its customers. It will course correct. 

If it hits $250, back up the truck and buy. You’re getting a deal.  

 

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On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.