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A Duo of Underperforming Stocks to Reduce

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- By Alberto Abaterusso

Shareholders of Grupo Supervielle SA (NYSE:SUPV) and Weidai Ltd (NYSE:WEI) have seen their assets going down in value dramatically over the past couple of years, underperforming the S&P 500 Index substantially.

Furthermore, sell-side analysts on Wall Street seem to be quite pessimistic about these stocks, as they have issued lackluster ratings for them.


Therefore, shareholders of these stocks may want to consider reducing their holdings, in my opinion.

Grupo Supervielle SA

Grupo Supervielle SA is a Buenos Aires, Argentina-based financial services provider focusing on various banking products and services for consumers and businesses in Argentina.

Shares have declined by 20% over the past year, 88% over the past three years and 83% over the past five years through June 1, underperforming the S&P 500 by 58%, 142% and 183%, respectively.

Grupo Supervielle SA has paid annual dividends over the last four years, but the payment that the company is granting is very small for shareholders, as it was just 2.7 cents per common share on May 21. It is generating a dividend yield of 1.32%, which, as of June 1, is even less compelling than the S&P 500's dividend yield of 1.37%.

The balance sheet of the Argentinian regional bank is solid, but the profitability of its operating activities is currently losing the match with most of the competitors. In fact, amid the most relevant financial indicators, the net margin ratio of 3.02%, the return on equity (ROE) ratio of 5.41% and the return on assets (ROA) ratio of 0.76% are all below the industry medians. The only financial indicator that is above the industry median is the three-year revenue growth rate of 6.2%.

The share price traded at around $2.03 at close on June 1 for a market capitalization of $185.42 million and a 52-week range of $1.53 to $3.68.

A Duo of Underperforming Stocks to Reduce
A Duo of Underperforming Stocks to Reduce

The 14-day relative strength index of 66 indicates the stock is still trading far from oversold levels despite the sharp decline in the share price.

Eight sell-side analysts on Wall Street have issued recommendations on this stock for a median rating of underweight and an average target price of $2.33 per share.

Weidai Ltd

Weidai Ltd is a Hangzhou, China-based operator of a platform featuring auto-backed financing solutions. On this platform, borrowers (usually owners of small enterprises) are networked with online investors and institutional funding partners.

Shares have declined by 34% over the past year, 89% over the past three years and by 90% over the past five years through June 1, underperforming the S&P 500 by 72%, 143% and 190%, respectively.

Over the period observed, Weidai Ltd has never paid dividends.

The balance sheet of the company is solid as GuruFocus has rated it with a score of 7 out of 10. However, with regard to its profitability, which scores 5 out of 10, the operating margin of 7.37% and the net margin of 6.09% are significantly below the industry medians of 19.03 and 13.95%, respectively.

The share price traded at around $1.07 at close on June 1 for a market capitalization of $75.39 million and a 52-week range of $0.73 to $5.49.

A Duo of Underperforming Stocks to Reduce
A Duo of Underperforming Stocks to Reduce

The 14-day relative strength index of 50 indicates the stock is still far from oversold levels despite the share price tumble.

One sell-side analyst on Wall Street has recommended a sell rating for this stock.

Disclosure: I have no positions in any securities mentioned in this article.

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This article first appeared on GuruFocus.