We recently published a list of 10 Best Depressed Stocks To Buy Heading into 2025. In this article, we are going to take a look at where Sasol Limited (NYSE:SSL) stands against other best depressed stocks to buy heading into 2025.
Will a Strong Earnings Season Help Overcome Election Volatility?
In one of our recent articles about 10 High Growth Non-Tech Stocks That Are Profitable in 2024, we talked about how the US market has continued to show resilience against economic and market challenges. We also covered the analysis of Anastasia Amoroso, iCapital chief investment strategist regarding the current market conditions. Here’s a short excerpt from the article:
“Anastasia Amoroso, the iCapital chief investment strategist, recently appeared on a CNBC interview to talk about the current market conditions.
As the market has entered the early stage of the earnings season, analysts are expecting earnings to help buffer the volatility that might come from the elections. Alan McKnight, Regions Wealth Management CIO, joined CNBC for an interview to talk about how the rate cut environment is reflected in the earnings. He thinks although it is very early to make any judgments regarding the earnings, however, as far as the recent data is concerned it is painting a positive image. He also mentioned that the good thing about the earnings so far is that overall management and CEO sentiment regarding their companies is positive and most are not expecting any weakness as we approach the end of the year.
While answering the question whether the current positivity is a trickle-down effect of the interest rate cut. McKnight thinks that the effect of the rate cut has not kicked in yet, what we are witnessing is a very strong consumer environment led by encouraging spending. The US consumer has been resilient and wants to spend, moreover, the rate-cut environment is enabling them to continue spending.
The earnings expectations have been lower moving in but they continue to rise as we reach the year’s end. McKnight thinks that this is going to be one of the key challenges for companies moving into 2025. Companies have been able to layer in some operating margin improvement, including sales growth. However, next year, they will have to sustain this growth, which is going to be difficult. Therefore, he sees growth coming down in 2025. He also pointed towards valuations becoming a problem if growth comes down, because the market is currently trading at a forward price-to-earnings ratio of 22 to 23, and companies would have to at least maintain current-year earnings growth to be fairly valued.
The interest rates are coming down, which should technically bring down the cost base for the market. However, the cost base never comes down as quickly as the market would like, similar to inflation, that’s where companies would find it challenging to maintain high growth rates.
McKnight advised that investors should stay balanced while investing, he mentioned that investors shouldn’t be chasing high flyers or just the big names that have been working, instead have a broad portfolio based on quality. Moreover, while mentioning the sectors he likes, McKnight mentioned Utilities and Communication Services. He thinks that the current news regarding the expected growth in the power sector along with the discussion of nuclear power for data centers is going to shape utilities over the next 3 to 5 years.
Our Methodology
To curate the list of the 10 best-depressed stocks to buy heading into 2025, we used the Finviz stock screener and Yahoo Finance. We defined depressed stocks as those trading within 0% to 3% of their 52-week lows. Using the Finviz stock screener, we got an aggregated list of stocks that fit our criteria. Next, we ranked these stocks based on the analyst upside potential sourced from CNN. All indicators were recorded on October 17th, 2024.
Moreover, we have also mentioned the number of institutional investors holding each stock sourced from the Insider Monkey database. Please note that the list is ranked in ascending order based on the analyst upside potential.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Sasol Limited (NYSE:SSL) is an international chemical and energy company based in South Africa. The company operates through an energy and chemical division, where the energy division is divided into mining, gas, and fuel segments. On the other hand, within the chemical division, the company manufactures high-performance materials used in various industries.
Sasol Limited’s (NYSE:SSL) H2 2024 revenue declined by 5% year over year to ZAR 275.1 billion ($15.62 billion), largely due to lower chemical prices and volumes sold, as well as inflationary pressures. Moreover, the company also reported a substantial decrease in cash generation and profitability. Adjusted EBITDA fell by 9%, and free cash flow decreased by 60% year-on-year.
However, there were some positive highlights for the company as well, including the mining productivity improving by 3% and Mozambique gas production improving by 6%. Management has also initiated cost reduction measures, resulting in a 1% increase in cash fixed costs, which is below inflation rates. They also achieved a 5% decrease in cash fixed costs through focused initiatives. Moreover, the free cash flow generation improved by 100% between H1 and H2 of fiscal 2024.
Although the stock is trading close to its 52-week lows the analysts expect its price to grow by around 78% during the year, making it one of the best depressed stocks to buy heading into 2025.
Overall, SSL ranks 2nd on our list of best depressed stocks to buy heading into 2025. While we acknowledge the potential of SSL to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for a promising AI stock that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
