Whatever strategy an investor takes, the ultimate result is always to find the strongest return. That return on investment is where the profit lies – profit that can be pocketed, or spent or reinvested to expand the portfolio. Finding them is the trick.
For a savvy investor, it’s a good starting point to filter through the “noisy” market data and find stocks that have both strong fundamentals and solid growth histories. Looking for the stocks that have delivered returns and are predicted to continue to deliver that returns is a common-sense strategy, even if it goes against the cold advice that made profits in the past to guarantee future returns. Because sometimes the signal works.
With this in mind, we used The TipRanks database in our search for exciting growth names, according to the analyst community. By sticking to three stocks to fit the bill, each analyst-backed ticker stands for more gains on top of their impressive climbs so far. Here are all the details.
Middleby Corporation (MIDDLE)
Let’s start in the simple kitchen, where so much life takes place. Middleby is a manufacturer of cooking equipment for restaurants, food service and industrial customers, as well as kitchen equipment for domestic use. 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 used that basic fact for strong performance; the company’s stock is up 123% in the past 12 months.
Earlier this month, the company released its Q2 results and 2021 forecast ahead of consensus. In particular, second quarter revenue and adjusted EBITDA are now expected to reach $808 million and $186 million, above consensus of $794 million and $174 million, respectively. Full year 2021 revenue and adjusted EBITDA are now expected to reach $3.244 billion and $730 million, respectively.
There was talk of Middleby taking over its biggest competitor, Welbilt. That move would have been a coup for Middleby, as it would have combined the leading suppliers of food service equipment and bakeries. Earlier this month, however, it became clear that a Middleby-Welbilt combo is off.
This does not mean that Middleby has not been successful in its expansion efforts. The company announced on July 12 that it would acquire Belgium-based hob and hood manufacturer Novy. The transaction will bring Novy’s customer base to Middleby’s orbit along with annual revenue of $90 million. And earlier this year, Middleby signed a major deal with Vyv, the antimicrobial technology company. The agreement with Vyv includes investments and licenses, including Middleby acquiring the rights to bring Vyv’s proprietary antimicrobial LED technology into the cooking industry.
MET analyst Joel Tiss has an aggressively optimistic view of Middleby, writing, “Middleby looks set to become a category killer…if the company continues to deliver strong margins, we think its stock could easily drive through $200 and hit $250-plus…”
The analyst added, “Commercial revenue is unlikely to match the 2019 figure. On the other hand, revenue strength for both the Residential and Processing divisions, along with the company’s EBITDA margins, appear well placed to levels from two years ago, but revenue and resulting profitability could pick up in 2H21 as greater volume leverage and price gains from mid-1Q21 and those set to roll out in mid-3Q21 begin to take hold and offset rising inflation. ”
In line with these bullish comments, Tiss is setting an Outperform (ie Buy) rating for the stock, and its price target of $250 indicates a potential for ~32% upside in the coming months. (To view Tiss’ track record, click here)
Overall, the 5-1 Buy vs. Hold breakdown in recent reviews shows that Wall Street agrees with Tiss on Middleby’s outlook. The stock is selling for $188.73 and the average price target of 214.23 suggests there is room for ~14% upside potential this year. (See MIDD stock analysis on TipRanks)
Horizon therapy (HZNP)
We then move on to the biopharmaceutical sector, where Horizon Therapeutics is engaged in manufacturing and researching drugs for rare, autoimmune and severe inflammatory diseases. The company has an active portfolio of 11 approved drugs on the market, treating conditions ranging from thyroid eye disease, osteoarthritis, gout and even the ulcer secondary to long-term use of traditional pain relievers such as ibuprofen. Horizon also has an active research pipeline, exploring new tracks for the approved drugs, as well as several brand-new drug candidates. The research trajectories range from early preclinical stages to phase 3 studies.
Horizon reported its results for the first quarter of May 21, and while it missed earnings estimates, it exceeded its revenue forecast. The bottom line came in at a net loss of 55 cents, compared to a profit forecast of 5 cents; the loss of profit was also deeper than in the prior year quarter. On the upside, net sales of $342.4 million were down 3.8% yoy but beat expectations by 4.8%. Looking ahead, Horizon will report Q2 results on August 4.
The company’s flagship gout treatment company, Krystexxa, is currently undergoing the randomized control study MIRROR, a Phase 4 study of the drug in combination with methotrexate in patients with uncontrolled gout, and a PROTECT study, an open-label Phase 4 study of Krystexxa in the treatment of uncontrolled gout in renal transplant patients.
Earlier this year, in March, Horizon completed its acquisition of Viela, another biopharmaceutical research company whose pipeline was considered a solid strategic addition to Horizon’s program. The acquisition was a two-step cash offer, totaling some $3 billion, or $53 per Viela share. Viela brings Uplizna to Horizon’s portfolio of approved drugs, a treatment for neuromyelitis optica spectrum disorder (NMOSD). This rare autoimmune disease affects the optic nerve, spinal cord and brain stem.
Through it all, Horizon’s stock has been the winner. Shares are up 73% over the past year, demonstrating that investors are optimistic about the company’s acquisition, approved drug sales and research program.
According to Piper Sandler’s analyst David Amsellem, the main factor Horizon is Krystexxa. His firm conducted an informal survey of 20 rheumatologists and found that those doctors are at least optimistic about Krystexxa in treating uncontrolled gout.
“Feedback generally suggests that Krystexxa is poised for continued aggressive growth, making HZNP’s maximum US sales target of $1 billion in our view potentially conservative. Simply put, the data to date on Krystexxa in combination with immunomodulatory agents clearly has a major impact on physicians’ understanding of the basic risk-benefit profile of the product, and forthcoming data from the MIRROR trial is likely to further evolve in the opinion of doctors (i.e., encouraging even greater product adoption). We continue to believe that HZNP is well positioned for a long-term EBITDA CAGR (2022+) of more than 20%,” Amsellem wrote.
To this end, Amsellem gives HZNP a one-year price target of $125, suggesting the stock is around 24% and supports its Overweight (ie Buy) advice for the stock. (To view Amsellem’s track record, click here)
Overall, Strong Buy’s 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 a 19.5% increase for the coming year. (View HZNP Stock Analysis on TipRanks)
PCB Bancorp (PCB)
For the last stock we go to the financial sector. PCB Bancorp is a holding company and the parent company of Pacific City Bank. PCB offers a full range of personal and commercial banking services primarily in Southern California, including checks and savings, deposits, loans, mortgages, online banking, wealth management and cash management. The bank serves private, corporate and professional customers and serves small and medium-sized enterprises.
The economic reopening has been good for PCB. The bank’s operations have surged as customers returned to work and money began to circulate in the economy. Earnings bottomed out in 2Q20 and have risen steadily; the bank posted its fourth consecutive EPS in its July 22, 2Q21 report. EPS was the best of the past two years at 64 cents per share. Earnings per share beat forecast by 10 cents per share, nearly triple the 22 cent earnings posted in the same quarter a year ago. On the upside, quarterly revenue of $25.2 million was 15% higher than a year ago, and the highest since the fourth quarter of 2019.
Coinciding with earnings results, PCB announced its regular quarterly dividend and announced a 20% increase to 12 cents per common share. At 48 cents year-over-year, this gives the dividend a yield of 3.09%, significantly higher than the ~2% average found in publicly traded S&P stocks. The increase was the first since 2019 and shows management confidence in the ebb and flow 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 that from a reserve (~2.8% with numbers) and capital perspective (16.3% TRBC) PPBI is better positioned to take advantage of opportunities (organic and M&A) as they arise. PPBI would have to trade at a premium to peers for its stronger PPNR, disciplined credit history and stronger ACL/capital ratios,” Clark noted.
Unsurprisingly, Clark is considering overweighting (ie buying) PCB’s stock along with a price target of $21. This figure implies an increase of about 20% from current levels. (To check out Feaster’s track record, click here)
PCB stocks have an average buy consensus rating as the stock has recently received only two ratings. But both are positive, so that consensus is unanimous. (See PCB Stock Analysis on TipRanks)
To find great ideas for trading growth stocks at attractive valuations, visit TipRanks’ Best stocks to buy, a newly launched tool that unites all of TipRanks’ stock insights.
Disclaimer: The opinions expressed in this article are those of the recommended analysts only. The content is for informational purposes only. It is very important to do your own analysis before making any investment.