Despite the Nasdaq-100 rocketing 10.6% higher in January 2023, some stocks haven't had nearly the same success. The three worst Nasdaq-100 performers in January were Enphase Energy (ENPH -2.57%), Intuitive Surgical (ISRG -0.41%), and Automatic Data Processing (ADP -0.38%).
These three aren't off to a great start, but could they still rebound as 2023 progresses? Let's find out.
1. Enphase Energy
Enphase was the basement dweller among Nasdaq-100 stocks, down 16.5% in January. This follows a 16% fall in December, so clearly, things aren't going well at Enphase. Or are they?
Enphase is a solar company that makes microinverters that convert direct current (DC) produced by solar panels to alternating current (AC) to be utilized in homes or office buildings. When investors last heard from Enphase, the company delivered revenue growth of 20% and a massive earnings per share (EPS) increase of 431% to $0.85 in the third quarter. With execution like that, it's difficult to understand why a stock would be sold off ... until you look at its valuation.
Although it's valued much lower than in years past, Enphase still trades at a massive premium to its pre-2020 levels.
ENPH PS Ratio data by YCharts. PS Ratio = price-to-sales ratio.
For an industrial company that essentially makes a commodity (inverters), 15.8 times sales isn't realistic. Plus, it trades at a sky-high 106 times earnings. So while Enphase as a company isn't doing poorly, its premium valuation will likely give the stock troubles throughout 2023.
2. Intuitive Surgical
Intuitive Surgical is a leader in minimally invasive robotic surgery, and its Da Vinci robots have made it a forerunner in its space. Down 7.4% in January, Intuitive Surgical's fall was driven by its disappointing Q4 earnings results.
In Q4, Intuitive Surgical reported slow revenue growth of 7%, and EPS decreased from $1.04 last year to $0.91 this year. Investors also worry that Intuitive Surgical might have slower growth in the future, mainly due to 4% fewer systems installed in Q4 this year versus last. However, that's likely a bit misguided, as the purchasing cycle for these machines can be pretty lumpy.
Still, Intuitive Surgical isn't the growth machine it once was, and investors likely need to adjust their expectations regarding what it can deliver in terms of stock performance. At 14.3 times sales, many other stocks are valued lower but are growing more rapidly, making Intuitive Surgical a less attractive stock.
Unless Intuitive Surgical can kick-start a wave of at least 20% growth in 2023, I wouldn't be surprised to see this valuation fall even further in 2023.
3. Automatic Data Processing
Automatic Data Processing, the maker of human resources and payroll software, is more commonly known by its abbreviation, ADP. Its stock was down 5.5% in January, which is at the lower end of a group of a dozen stocks that didn't perform nearly as badly as Intuitive Surgical or Enphase.
Once again, quarterly earnings were to blame for the stock's performance, falling 7.7% in the days following the report. During Q2 of its fiscal 2023 (ending late July 2022), it reported 9% year-over-year revenue growth, with EPS up 18% to $1.95. It also maintained its full-year guidance, echoing the results delivered in Q2.
There's not a whole lot wrong with the report, and the stock trades right around its five-year price-to-earnings average.
ADP PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.
Additionally, it has raised and paid its dividend for over 25 consecutive years and currently sports a 1.9% yield.
If you're looking to buy any of the Nasdaq-100's worst-performing stocks in January, ADP is likely the best on this list, as its consistent performance can give investors stability in their portfolios. Plus, it has a long-term record of beating the market.
