Goldman Sachs has named eight global stocks of companies that will turn profitable this year and outperform the broader market. In a new research report, the investment bank found that companies that transition from unprofitable to profitable during a market recovery tend to outperform the broader market. According to Goldman, this phenomenon occurred in 2001 and 2008, with each time more than 50% outperformance. “[The research] assess the performance of companies during the Tech Bubble and GFC periods and note that companies that were able to successfully transition from unprofitable to profitable tended to outperform,” said the team led by Jessica Binder Graham, co-head of European equity research for Goldman Sachs Research, in a note to clients on Feb. 28 Goldman Sachs also said shares of European companies going through this transition are already showing signs of 6% outperformance against the Stoxx 600. The following table highlights three buy-rated stocks where net profit margins were negative in 2021 and 2022, and which Goldman analysts expect will turn green this year and next. energy crisis in Europe over the past two years Pan-European classifieds manager Adevinta and Swiss solar engineering firm Mey Burger are expected to become profitable again this year. This is especially true in the early days of a stock market recovery and applies not only to net income or earnings per share, but also to free cash flow (FCF), the bank said. The table below shows five buy-rated stocks whose FCF margins have been negative for the past two years, but are expected to turn positive in 2023 or 2024, according to the bank’s analysts. In addition, these stocks are predicted to improve their FCF margins over the same period. Chemical companies Lanxess and Clariant, Swiss pharmaceutical company Lonza, French utility Engie and US-listed Swiss clothing retailer On Holding were loss-making and are now expected to turn a profit, Goldman said. However, Goldman cautioned that the bank is not confident that the market has bottomed out and that the trend only applies in a market recovery scenario. “While we cannot definitively say that the market bottom is behind us, there are signs that this theme is already trading,” the analysts added. – CNBC’s Michael Bloom contributed to this report.
Goldman on 8 stocks that will outperform the market if they become profitable
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