18 ASX stocks hit 52-week lows last week and why it's been a painful value hunting experience

Welcome back to another 52-week low series where we trawl through some of the market’s most discarded and disliked companies.

Market Index’s 52-week lows scan shows users which companies are making 52-week lows on the given day.

In my first article, we reviewed The 52-Week Low Formula by Luke Wiley, Senior Vice President of UBS. His five key criteria (and in that order) include:

1. Durable competitive advantage

2. Required minimum free cash flow yield (above 10-year Treasury yield)

3. Return on invested capital greater than cost of capital

4. Free cash flow to long-term debt ratio of less than three

5. Trading below historic and recent high prices, more sellers than buyers

We're going to take a look at the companies that hit 52-week lows this week and why its a painful time to be sifting through the value bin.

Stocks that hit 52-week lows last week

Note: This list only refers to companies with a market cap of more than $300 million. Share price performance as at Monday, 17 April 2023.

Interesting takeaways

Looking back: In my first 52-week low series, we filtered the list for companies that passed at least three of Wiley's five criteria. There were two notable companies that made it through: OFX and Elders. To summarise:

• OFX: The stock has gone nowhere since 2014 and its profits have gone full circle ($24.3m in FY15 and $24.5m in FY22). From a valuation perspective, its traded at an average PE ratio of 22.5 since 2014, compared to its current PE ratio of just 13. That said, the stock tumbled 10% on March 23 after a trading update noted "softening of demand in its High Value Customer segment". Is this a classic example of a company that looks cheap but then earnings deteriorate?

• Elders: Elders' FY22 results from November last year flagged several headwinds for the year ahead including adverse weather conditions, softening cattle and sheep prices, high inventory build and CEO retirement. The results triggered a sharp 22.9% selloff but the stock slumped another 19.6% since 14 November 2022.

Dip buying would've hurt: Both OFX and Elders have continued to sell off from previous 52-week lows. This is the case for a vast majority of companies on the 52-week low list. The way they played out, more broadly speaking, goes something along the lines of:

• A catalyst (e.g. announcement, earnings, trading update) triggers a sharp selloff

• The stock spends a few days trying to stabilise post selloff

• Stabilising fails and the stock dips to another fresh low

OFX (blue) and Elders (yellow)

Not the time to be weak: This weakness is occurring during a time when the ASX 200 is up 12 of the last 14 sessions, up 6.2%. So if these stocks are hitting fresh lows as the broader market bounces, what does this tell you about how the market feels about these stocks?