No matter what strategy an investor follows, the end result in view is always to find the strongest returns. That return on investment is where the profits lie – profits that can be pocketed, or spent, or reinvested to expand the portfolio. Finding them is the trick.
For a savvy investor, a good starting point is filtering through the ‘noisy’ market data and finding stocks that feature both strong fundamentals and a solid growth history. Seeking out the stocks that have delivered returns, and are predicted to continue delivering those returns, is a common-sense strategy, even if it runs counter to the cold advice that past gain to guarantee future returns. Because sometimes, the signal works.
Bearing this in mind, we used TipRanks’ database during our search for exciting growth names, according to the analyst community. Locking in on three stocks that fit the bill, each analyst-backed ticker stands to notch more gains on top of their impressive year-to-date climbs. Here are all of the details.
Middleby Corporation (MIDD)
Let’s start in the humble kitchen, where so much of life takes place. Middleby is a manufacturer of cooking equipment for restaurant, food service, and industrial customers, and of kitchen appliances for residential uses. Middleby also has a commercial cooking segment that does business with major food service chains in the US and abroad.
We all need to eat, and Middleby has leveraged that basic fact to strong performance; the company’s stock is up 123% in the past 12 months.
Earlier this month, the company pre-announced Q2 results and 2021 guidance ahead of consensus. Specifically, Q2 sales and adjusted EBITDA are now expected to come in at $808 million and $186 million, ahead of consensus $794 million and $174 million, respectively. Full year 2021 sales and adjusted EBITDA are now expected to come in at $3.244 billion and $730 million, respectively.
There was talk that Middleby was going to acquire its leading competitor, Welbilt. That move would have been a coup for Middleby, as it would have combined the leading food service equipment and bakery providers. Earlier this month, however, it became clear that a Middleby-Welbilt combo will not be happening.
This doesn’t mean that Middleby has been unsuccessful in its expansion activities. The company on July 12 announced that it would acquire Belgium-based cooktop and vent hood maker Novy. The transaction will bring Novy’s customer base into Middleby’s orbit, along with $90 million in annual revenue. And earlier this year, Middleby scored an important agreement with Vyv, the antimicrobial tech company. The agreement with Vyv includes investment and licensing, under which Middleby will gain rights to bring Vyv’s proprietary antimicrobial LED tech into the cooking industry.
BMO analyst Joel Tiss takes an aggressively upbeat view on Middleby, writing, “Middleby appears set to become a category killer… if the company continues to deliver strong margins, we believe its stock could easily drive through $200 and take out $250-plus…”
The analyst added, “Commercial revenue will likely not match the amount from 2019. On the other hand, top-line strength for both Residential and Processing divisions, along with company EBITDA margins, appear well situated to expand past levels from two year ago. But sales and resultant profitability upside could come in 2H21 as greater volume leverage and price hikes from mid-1Q21 and ones that will get implemented mid-3Q21 start to take hold and offset rising inflation.”
In line with these bullish comments, Tiss sets an Outperform (i.e. Buy) rating on the stock, and his $250 price target indicates potential for ~32% upside in the coming months. (To watch Tiss’s track record, click here)
Overall, it’s clear from the 5 to 1 Buy versus Hold breakdown in recent reviews that Wall Street agrees with Tiss on the prospects for Middleby. The stock is selling for $188.73 and its average price target of 214.23 suggests it has room for ~14% upside this year. (See MIDD stock analysis on TipRanks)
Horizon Therapeutics (HZNP)
Next up, we’ll turn to the biopharmaceutical sector, where Horizon Therapeutics is engaged in the production and research of medications for rare, autoimmune, and sever inflammatory diseases. The company has an active portfolio of 11 approved medications on the market, treating conditions as varied as thyroid eye disease, osteoarthritic pain, gout, and even the stomach ulcer secondary to long-term use of traditional pain relievers such as ibuprofen. Horizon also has an active research pipeline, investigating new tracks for the approved medications as well as several wholly new drug candidates. The research tracks range from early preclinical stages to Phase 3 trials.
Horizon reported its 1Q21 results back in May, and while it missed earnings estimates it beat the revenue forecast. The bottom line came in at 55-cent net loss, compared to a 5-cent profit forecast; the earnings loss was also deeper than the in the year-ago quarter. At the top line, the $342.4 million in net sales was down 3.8% yoy, but exceeded expectations by 4.8%. Looking ahead, Horizon will report Q2 results on August 4.
The company’s flagship anti-gout medication, Krystexxa, is currently undergoing MIRROR randomized control trial, a Phase 4 trial of the drug in combination with methotrexate in patients with uncontrolled gout, and a PROTECT trial, a Phase 4 open-label study investigating Krystexxa in the management of uncontrolled gout in kidney transplant patients.
Earlier this year, in March, Horizon completed its acquisition of Viela, another biopharma research company whose pipeline was considered a sound strategic compliment the Horizon program. The acquisition was a two-step cash tender offer, totaling some $3 billion, or $53 per share of Viela. Viela brings Uplizna to Horizon’s portfolio of approved drugs, a treatment for neuromyelitis optica spectrum disorder (NMOSD). This rare autoimmune disease attacks the optic nerve, spinal cord, and brain stem.
Through all of this, Horizon’s stock has been the gainer. The shares are up 73% over the past year, showing that investors are upbeat on the company’s acquisition, approved drug sales, and research program.
In the view of Piper Sandler analyst David Amsellem, the key factor Horizon is Krystexxa. His firm conducted an informal survey of 20 rheumatologists, and found that those doctors, at least, are upbeat about Krystexxa in the management of uncontrolled gout.
“The feedback, on the whole, suggests that Krystexxa is poised for continued aggressive growth, rendering HZNP’s peak U.S. sales target of $1B as potentially conservative, in our view. Put simply, the data to date surrounding Krystexxa in combination with immunomodulatory agents is clearly having a major impact on physicians’ understanding of the fundamental risk/benefit profile of the product, and the upcoming data from the MIRROR study is likely to drive further evolution in physicians’ views (i.e., driving even more adoption of the product). We continue to believe that HZNP is well-positioned for a long-term EBITDA CAGR (2022+) in excess of 20%,” Amsellem wrote.
To this end, Amsellem gives HZNP a one-year price target of $125, suggesting ~24% and supporting his Overweight (i.e. Buy) rating on the stock. (To watch Amsellem’s track record, click here)
Overall, the Strong Buy consensus rating on Horizon is unanimous, based on 4 recent stock reviews. At a current trading price of $101.05, the stock’s average price target of $120.75 implies an upside of 19.5% for the year ahead. (See HZNP stock analysis on TipRanks)
PCB Bancorp (PCB)
For the last stock, we’ll head over to the financial sector. PCB Bancorp is a holding company, and the parent of Pacific City Bank. PCB offers a full range of personal and commercial banking services, mainly in Southern California, including checking and savings, deposits, loans, mortgages, online banking, wealth management, and cash management. The bank serves individual, commercial, and professional customers, and serves small- to mid-sized businesses.
The economic reopening has been good to PCB. The bank’s business has jumped as customers got back to work and money started recirculating in the economy. Earnings troughed in 2Q20, and have been rising steadily; the bank posted its fourth sequential EPS gain in its July 22 2Q21 report. The EPS result, at 64 cents per share, was the best in the last two years. EPS beat the forecast by 10 cents per share, and was nearly triple the 22-cent result posted in the year-ago quarter. At the top line, the quarterly revenue of $25.2 million was 15% higher than the year-ago result, and the highest since the fourth quarter of 2019.
In tandem with the earnings results, PCB declared its regular quarterly dividend, announcing a 20% increase in the payment, to 12 cents per common share. At 48 cents annualized, this gives the dividend a 3.09% yield, significantly higher than the ~2% average found among S&P listed stocks. The increase was the first since 2019, and demonstrates management confidence in the ebb of the corona crisis.
Investors are also confident in PCB, and the stock is up 75% year-to-date.
Covering PCB for Piper Sandler, 5-star analyst Matthew Clark is optimistic about the bank’s growth, prospects, and ability to return profits to shareholders.
“We believe PPBI is better positioned from a reserve (~2.8% with marks) & capital perspective (16.3% TRBC) to take advantage of opportunities (organic & M&A) as they emerge. PPBI should trade at a premium to peers for its stronger PPNR, disciplined credit history and stronger ACL / capital ratios,” Clark noted.
Unsurprisingly, Clark rates PCB shares an Overweight (i.e. Buy), along with a $21 price target. This figure implies ~20% upside from current levels. (To watch Feaster’s track record, click here)
PCB shares have a Moderate Buy consensus rating, as the stock has received just two reviews recently. But both are positive, making that consensus unanimous. (See PCB stock analysis on TipRanks)
To find good ideas for growth stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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