Stocks are at the mercy of many factors, and often, prices are just a poor earnings report or a negative headline away from a significant drop. There are times when nobody has any way of preparing. In many instances, however, early signs of trouble creep in. Sensible investors can identify potential issues from declining financial reports, brewing service problems, poorly managed spending, or questionable business decisions.
Unfortunately, these three companies all show these signs, which may mean things are about to take a turn. So, perhaps it’s time to read the writing on the wall and sell these three Nasdaq stocks before prices deteriorate even further.
TrustCo Bank Corp NY (TRST)
With a mission to provide high-quality services at a low cost to its customers, TrustCo Bank Corp NY (NASDAQ:TRST) has built a legacy that spans more than 120 years.
TRST is a savings and loan holding company that offers bank services and operations via its principal subsidiary, Trustco Bank. The company operates in various states in the U.S., including offices in New York, Palm Beach, and New Jersey. The company’s primary business specializes in customer deposits, loans, and investments.
Looking at TRST’s latest financials, we can see potential causes for concern. Net income for FY2023 ended at $58.6 million, a 22% drop from $75.2 million year over year (YOY). Diluted earnings per share also fell to $3.08 from the previous year’s $3.93. In addition, a 21.5% decline in net interest income was driven by higher deposit costs, which may affect future profitability. Even Piper Sandler suggests selling TRST.
Uncertainties in the interest rate environment and continued challenges in profitability make a compelling argument to sell TRST.
Xerox Holdings Corporation (XRX)
While growing up, you would have probably heard of Xerox Holdings Corporation (NASDAQ:XRX), famous for its copying machines.
Over the years, the company has expanded its offering to managed services, information technology services, software, and automation. The company has been reorganizing its core businesses and infrastructure, which could be a key sign of difficulties under the hood. Additionally, the company reports they aim to reduce 15% of their workforce – definitely not a good sign.
According to the company’s Q4 financials, XRX’s revenue ended 9.1% lower YOY. Also, the quarter saw a GAAP net loss of $58 million. The bad news doesn’t stop there, as adjusted net income was down by $90 million YOY. Further, adjusted operating margins are down 380 basis points. Xerox hopes to return to “double-digit adjusted operating income margin by 2026.” I don’t know about you, but 2026 is a long time to wait, and perhaps it’s the same reason analysts think the stock is underperforming.
With a challenging outlook, declining revenue trend, and negative analyst sentiment, the situation could worsen. Therefore, it’s time to ditch XRX while you still have time.
FibroGen, Inc. (FGEN)
Commonly known for its research-based operations on developing medicine for cancer, anemia, and fibrotic disease, FibroGen, Inc. (NASDAQ:FGEN) is a leading player in China.
However, it still hasn’t inked distribution agreements in the markets that matter. That would include the U.S. and Europe, the places of big margins. The company is still banking on its clinical trial results, which can either be promising or another catastrophic event. That reference is to last year’s announcement of its failed Phase 3 ZEPHYRUS-1 Study of Pamrevlumab, Thus, the stock plummeted around 80% last July.
Furthermore, the company’s recent financial report has outlined several issues that should concern investors. FGEN inked a net loss of $56.2 million for Q4 and $284.2 million for the year. In addition, the high cost of clinical trials and drug development significantly affects its cash position and ability to fund operations. Even analysts on Wall Street don’t see the company performing well in the next 12 months. With no profitability and external funding, it is difficult to bet on FGEN. Hence, it’s best to sell it now and look for better Nasdaq stocks while you can.
On the date of publication, Rick Orford did not have (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.
