With interest rates at their highest levels in 15 years, companies can’t just rely on cheap debt as an option when making decisions. The companies that will fare best will be those that have strong cash flows and are run efficiently.
That should keep profit margins high, and provide the capital to benefit from new opportunities as they emerge. The more efficiently a company can operate, the more resilience it will have in the years ahead.
One company that’s been working on getting leaner by aggressively cutting costs is
Meta Platforms (META).
It’s taken a step back from a focus on the metaverse to increase the profitability of its social media platforms. It also helps that the company boosted ad revenue in the most recent quarter.
While still a “big tech” stock, Meta is now valued at 18 times forward earnings. Revenue growth hit 23 percent, the same level as the company’s profit margin.
And Meta has twice as much cash as debt on its balance sheet, making for a safe play in any economic environment.
Action to take: Investors may like shares at current prices, as they’re off more than 10 percent from their 52-week high.
While the company doesn’t pay a dividend, it could take some of its excess cash flows to create one in the future.
For traders, the January $300 calls, last going for about $16.50, are a bit pricey. But for a year-end rally, they’re well-positioned for high double-digit gains.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.