Finding the right stocks to sell is also vital in stock investing, like figuring out which ones to buy. Three stocks should be sold to protect portfolios against further declines. These businesses are excellent candidates for sale because of their severe financial weaknesses.
Specifically, the companies here rely excessively on one-time earnings to sustain profitability, which raises serious concerns with debt management. Additionally, there are challenges with diminishing gross billings and revenue. Due to growing non-performing loans (NPL) and provisions, the potential for their expansion hurts.
As a result, these vulnerabilities make these companies prime candidates for the stocks to sell list, providing caution to mitigate risk and safeguard investment capital. One can navigate the unpredictable market by understanding these stocks’ financial and operational shortcomings. It means avoiding stocks that may erode the investment value.
Overall, the financial red flags indicate potential risks and undermine the companies’ long-term growth prospects.
Stocks to Sell Before July: Dynagas (DLNG)
Dynagas (NYSE:DLNG) leads in liquefied natural gas (LNG) shipping. The company’s Q4 2023 net income of $10.5 million represented a 9.5% year-over-year (YoY) decline. This decline derives from certain variables, including unrealized gains on interest rate swaps and the lack of profits from debt extinguishment.
Although 2023’s adjusted EBITDA of $94.4 million reflects operational strength, the Q4 drop reflects that the growth trajectory is unsustainable if the company fails to address the underlying debt commitments. Moreover, the company’s dependence on modified measures implies that to sustain profitability, the company may need the required operational edge.
Further, since December 2019, Dynagas has been actively lowering its leverage. The effort reflects the considerable drop in the net leverage ratio from 6.6 times to 3.7 times. However, given the high expiring debt, the company’s continued efforts to decrease debt may need to be revised to lessen the risks tied to the debt maturity in September 2024. Although it has demonstrated sharp financial success, its dependence on one-time profits and problems with debt management qualify it for the stocks to sell list.
TD Synnex (SNX)
TD Synnex (NYSE:SNX) is one of the lead distributors of technology offerings. In Q1 2024, net revenue decreased by 7.6% YoY to $14 billion. Meanwhile, total gross billings decreased by 5% YoY to $19.3 billion. It is concerning that both revenue and gross billings have decreased. Additionally, there was a 7% YoY fall in the Endpoint Solutions section, which weakened this important business area. A reduction in the performance of the core business may ensure the total growth potential is maintained.
Moreover, the Endpoint Solutions segment is declining by 7% YoY. This drop suggests the company’s capacity to sustain or increase revenues in these crucial categories needs to be revised. Thus, the decrease in demand for various devices and components within Endpoint Solutions may outweigh the expected increase in the PC market through 2024.
Finally, the revenue drop overshadows advances in operating income and operating margin, underscoring the difficulty of sustaining profitability in the face of diminishing sales.
Credicorp (BAP)
Credicorp (NYSE:BAP) is a diverse financial services provider. Peru and other Latin American nations are the company’s main markets. The company’s non-performing loan (NPL) ratio rose by 0.77% to 6.2% YoY. There has been a considerable increase in loans needing to be serviced by the contract terms.
Additionally, the cost of risk rose to 2.3% despite measures to control provisions, indicating the company’s inability to limit the effects of failing loan portfolios. Moreover, the underlying cost of risk increased to 3% when the impact of certain events, including El Nino-related provisions, was separated.
Further, a quarter-over-quarter comparison indicates a 30.6% YoY decline in provisions, mainly due to an El Nino-related reversal in provisions. Excluding this effect, however, caused provisions to rise by 16%, indicating continued difficulties in managing credit risk. Average daily balances showed a 3.1% YoY decline in total loans. Here, the decline in loan balances suggests a cautious lending strategy arising from concerns about asset quality and rising non-performing loans.
To sum up, Credicorp is on the stocks to sell list because of its ongoing problems with NPLs and provisions, which indicate possible hazards.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.