Return and risk are two sides of the same coin. Investors all want the former while keeping the latter low – but that’s a pipe dream. Every stock comes with both, and a key to success is managing the balance.
That balance can be tricky, though, because risk and return potential usually follows a direct relationship; that is, the stocks with the highest returns tend to carry a higher risk as well. This makes sense because the surest way to get high returns is to find stocks with low initial share prices – because in those cases, even a small gain in absolute dollars will quickly translate into a high percentage of the initial investment. But the reverse is also true, and that significant benefit comes with higher risk.
However, for investors willing to take it upon themselves, the market is full of good choices. These are stocks that fit a profile, a Strong Buy consensus valuation, a low share price and significant upside potential.
We went through that search TipRanks Database, and found three stocks that deserved a closer look. Not only do they fit the profile, but they also bring an additional feature: a unanimous analyst consensus, a sign to investors that Wall Street’s bullishness isn’t a flash in the pan. Let’s take a closer look at that.
Electric Last Mile Solutions (ELMS)
We start in the automotive industry, especially in the electric vehicle (EV) segment. EVs are not new, they have been around since the invention of automobiles in the 1800s. However, they are now on the brink of an industrial breakthrough, due to a confluence of political pressures promoting the “green” economy and improved battery technology making EVs practical in ways they never were before. Modern EVs can hit regular highway speeds, with a range of 100 to 300 miles, on a single charge, and while they’re still expensive, prices are falling, putting them within reach of the masses.
Located in Troy, Michigan, near the heart of Detroit’s historic auto industry, Electric Last Mile is an EV company developing a customizable vehicle and has a 675,000-square-foot assembly plant in Indiana operating at full capacity. 100,000 can produce. EVs per year. The company is targeting the commercial market in urban areas, with a van in pre-order now and a class 1 commercial light truck in development. These vehicles are aimed at the ‘last mile’, the last part of the supply chain in transport networks.
The van has a range of 150 miles, sufficient for daily city deliveries, a payload capacity of 171 cubic feet, a payload capacity of 2,100 pounds and dimensions comparable to existing gasoline-powered vans. In addition, the vehicle will be equipped with wireless connectivity. The vehicle is scheduled for production launch later this year.
ELMS began trading on NASDAQ last June, following the completion of a SPAC merger with Forum Merger III. The transaction brought $379 million in new capital to ELMS.
Electric Last Mile Solutions has caught the attention of Jefferies’ 5-star analyst Stephen Volkmann, who is impressed with the company’s choice of a target market in the supply chain.
“Oddly enough, companies and markets have focused on electrification in the heavy (Class 8) and medium (Class 5-7) truck markets, despite significant range and cost challenges. In our view, the Class 1-3 ‘last mile’ market represents a much greater opportunity for BEVs as these vehicles typically have relatively low levels of daily mileage (50-60/day) and return to a home hub for consistent nightly load. We estimate a TAM of over 800K veh/yr as e-commerce continues to drive demand for vans, and we expect this segment to electrify the fastest, driving my government incentives and corporate sustainability goals,” Volkmann noted.
The analyst continued: “ELMS will be the first company to target these markets, with a vehicle that is already on par in cost to ICE vehicles and lower total cost of ownership. Assuming ELMS can successfully launch its vehicles as planned , we think it will probably sell out in production for years to come.”
To that end, Volkmann rates ELMS as a buy, along with a price target of $18. The analyst therefore expects the stock to rise ~116% in the coming months. (To view Volkmann’s track record, click here)
The unanimous Strong Buy consensus rating on ELMS is based on 5 ratings since the stock entered the public markets. Shares are currently priced at $8.30 each, and their average price target of $15.40 suggests upside potential of about 86% over a year. (View ELMS Stock Analysis on TipRanks)
Let’s stick to car-related companies. Ouster is a San Francisco-based technology company that makes LIDAR systems, an essential sensor technology used in autonomous vehicles. LIDAR allows self-driving cars to ‘see’ the road and traffic around them, both vehicles and pedestrians, in real time. It is an essential link connecting the AI brain of an autonomous vehicle to the real world.
Given the numbers, Ouster has a solid position in this growing industry. The company has 129 patents issued and pending, manufactures more than 75 unique sensor combinations and serves more than 500 customers worldwide. In 2020, the company sold more than 2,000 sensors. The company’s customers and partners include names such as Qualcomm, Nvidia and the US military. Ouster’s digital LIDAR sensors are used in a variety of industries, including automotive, as well as trucks, industrial manufacturing, infrastructure and robotics.
In March, the company entered public markets through a completed SPAC merger with Colonnade Acquisition, in a deal that valued the new public company at $1.9 billion. Ouster received $300 million in new funding from the deal and began trading on the NYSE on March 12.
In business news, Ouster struck a major deal with Plus, a supplier of autonomous trucks, to supply LIDAR sensor systems – up to 2,000 systems. The end user here will likely be Amazon, as the e-commerce giant has signed a contract with Plus to provide autonomous delivery vehicles.
This deal, which put Ouster in Amazon’s orbit, caught the attention of Richard Shannon, 5-star analyst at Craig-Hallum. Shannon takes note of Plus’s announcement of its contract with Amazon, then adds that the truck maker has already committed to contracts with Ouster. According to him, this will support Ouster in the long run.
“OUST’s announcement of its win with Plus for a minimum of 2K sensors (in a 2 sensor/truck configuration) came just 2 weeks later. OUST had hinted that the end customer was a major US player, and after the 8K, we’re pretty sure it’s AMZN. OUST indicated that its win could be worth 160K sensors, implying that AMZN is considering equipping 80K trucks with autonomous technology in the coming years and demonstrating that the industry is ready to adopt this technology on a large scale.” Shannon wrote.
The analyst added: “This is a big win for OUST and does two things: 1) shows that the demand for lidar in autonomous freight is real and here today, and the biggest players in the world are joining and 2) further establishes OUST as the current market leader for lidar in truck applications, as no other lidar maker has a production contract or end customer as impressive as AMZN.”
Based on the above, Shannon rates OUST stock as a buy, and his $20 price target suggests there is room for a 128% uptrend over the next 12 months. (To view Shannon’s record, click here)
Ouster has only been in the public markets for a few months, but in that time has received a unanimous Strong Buy consensus rating based on 3 positive reviews. The stock has an average price target of $16.67 and a trade price of $9.08, giving them a 90.5% year-on-year increase. (See OUST stock analysis on TipRanks)
CareCloud, Inc. (MTBC)
The last small-cap stock we look at, CareCloud, is a medical and healthcare IT provider that provides technical services and support for all facets of the medical sector. The company was previously called MTBC, but changed its name in March of this year. However, the business remains the same: technical support and cloud-based solutions for medical billing, practice management, transcription and other essential back-office support for doctors’ offices and hospitals.
CareCloud will report its Q2 results this week, but a look back at Q1 earnings could be helpful. Earnings per share came in at a loss of 36 cents, which was better than the loss of 42 cents reported in the same quarter a year ago. On the upside, revenue declined sequentially for the second quarter in a row, but at $29.8 million, it was a 36% year-over-year increase. The company reported $21 million in cash on hand.
On June 1, CareCloud announced that it had completed its acquisition of “certain assets” of MedMatica, a major name in medical personnel and back office consulting. The assets acquired include Santa Rosa Staffing and MedMatica Consulting Associates; financial details were not disclosed. In a statement from management, CareCloud said the new assets will enable a wider range of services to clients of the health system.
Among the bulls is Cantor analyst Steven Halper who noted, “With the acquisition of CareCloud, the company has added a SaaS-based EHR application. The company’s large offshore workforce is a competitive advantage in both pricing and the way it integrates acquisitions. Acquisitions were indeed a key part of the company’s growth, and we expect that to continue.”
The analyst added: “We think MTBC stocks are cheap on an EV/EBITDA basis. However, the company’s capital structure is complex given its previous issuance of perpetual preferred stock (MTBCP – not rated). We think MTBC is considering it.” simplify its corporate structure, which we believe would serve as a catalyst for the equities. Even with preference, we believe MTBC equities are very attractive at current levels…”
Halper gives MTBC stock an Overweight (ie Buy) rating, with a price target of $15, indicating confidence in a ~88% gain in the coming year. (To view Halper’s track record, click here)
It’s not often that analysts all agree on a stock, so watch out when it happens. MTBC’s Strong Buy consensus rating is based on a unanimous 5 Buys. The stock’s average price target of $16.20 suggests a ~105% gain from the current share price of $7.91. (See MTBC stock analysis on TipRanks)
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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.