How are we going to find a way forward in the current market environment? The overall trend is upward – the S&P 500 is up 20% so far this year and the NASDAQ is close at 19% – but market strategists at Goldman Sachs are predicting a slump before the end of the year and have scaled back their S&P growth forecast from 6.2% to 5.7%. August’s weak jobs report and rising inflation led to their shift.
Goldman’s Ronnie Walker looks at the headwinds: “The Delta variant is already weighing on growth in the third quarter, and waning fiscal stimulus and a slower service recovery will both be headwinds in the medium term.”
There is no reason to wait for a market crash, or even a slowdown, to find stocks at low prices, ready for profit as we go into next year. We have used the TipRanks platform to seek out several Strong Buy stocks, according to the analyst community, which have seen significant losses in recent months. Still, analysts remain optimistic and the stock shows significant upside potential. Here are the details.
Viemed Healthcare (VMD)
We start with Viemed, a healthcare provider with a unique niche in the industry. Viemed provides home therapy services and equipment for patients with severe chronic respiratory disease, including chronic obstructive pulmonary disease (COPD), chronic respiratory failure and other respiratory diseases caused by neuromuscular diseases. Viemed’s services include respiratory diseases, oxygen therapy, sleep apnea treatment and rental of ventilators and peripherals.
Viemed has a large patient base for its services, with more than 25 million COPD cases diagnosed in the US, and the Louisiana-based company operates in 23 states. Despite this, the company has seen its shares fall by 33% in the past 12 months, and revenues and profits have also fallen. Revenues, which peaked at $46 million in Q2 20, have since declined, standing at $26 million for 2Q21. Earnings per share of 4 cents this year were flat from Q1 to Q2 and fell dramatically from the 52 cents reported in 2Q20.
On a number of positives, 2Q21 earnings per share were double analyst expectations. Additionally, Viemed reported a cash balance of $31.2 million, versus long-term debt of $5.7 million. In a statistic that bodes well for the future, the company saw the number of ventilator patients grow by 5% from Q1 to Q2, to a total of 8,103.
Covering Viemed for Lake Street Capital, 5-Star Analyst Brooks O’Neil sees a clear path ahead for this home care provider.
“While the company is starting to recover from the disruption of COVID-19, we feel it remains a challenge to access both existing referrers and new referrers. The company continues to hire and train respiratory therapists… We continue to believe that the VMD at-home model is the preferred method of treatment for late-stage COPD patients, especially in a post-COVID environment where home treatment is becoming increasingly common. We believe that expanding territory, adding new representatives, pent-up demand and better access to hospitals will once again accelerate Viemed’s core organic growth. With cash on the balance sheet, we believe that a small to medium-term acquisition could take place in the medium term,” said O’Neil.
In line with these comments, O’Neil sets a buy recommendation for VMD stock, with a price target of $15, suggesting a 150% gain for the coming year. (To view O’Neil’s track record, click here)
For the record, each of the four Street analysts who published reviews of VMD stock in the past month rated it as “buy.” On average, these analysts predict that the stock will rise ~107% from its current price in the next 12 months to fly past $12.51. And that makes the stock a ‘strong buy’. (View VMD stock analysis on TipRanks)
LHC group (LHCG)
Next up, LHC Group, is another basin for health care providers in Louisiana. But while Viemed above focuses on respiratory problems, LHC offers a wider range of services. The company, which partners with nearly 400 hospitals, provides home care to patients suffering from acute illnesses, serious injuries or chronic conditions. In addition, LHC offers hospice care to patients with terminal conditions.
LHC benefits from a customer base that grows with the US population at large, and from providing home care services that are in demand after COVID. The company has seen revenue growth of 12% from 2Q20 to 2Q21, with current revenue of $545.9 million. Earnings per share, at $1.20, fell from $1.43 in the same quarter a year ago but rose sequentially for the third quarter in a row. Despite these gains, LHCG stocks are down 22% this year.
In recent weeks, LCH has expanded its services, especially in hospice care. On September 1, LCH completed the purchase of Heart of Hospice, expanding its service offerings in the states of Arkansas, Louisiana, Mississippi, Oklahoma and South Carolina. LCH expects to generate approximately $92.5 million in annual revenue from this acquisition. In another hospice acquisition, LHC entered into an agreement on Sept. 8 to purchase Brookdale Health Care Services. The purchase adds services in 23 home care locations, 11 hospices and 13 therapy offices in 22 states. In terms of revenue, LHC expects to see $146 million annually when the purchase is complete. Finally, LHC moved to buy two smaller hospice providers in Virginia. This smaller acquisition is expected to close in October and bring $7 million in annual revenue to LHC.
analyst Justin Bowers, from Deutsche Bank, writes of LHC path forward: “For 2022, we see improved hospice margins as a key upside driver not currently in our numbers. LHCG plans to exit 4Q with ~15% sustainable margin However, we’re currently modeling hospice margins at 12.6%, so we see a $10 million incremental benefit if they can generate 15% margins by 2022.
To this end, Bowers gives LHCG stock a buy rating and a price target of $260, implying a ~57% gain over the next 12 months. (To view Bowers’ track record, click here)
“We reiterate our Buy rating with the sell-off that gives investors the opportunity to buy one of the best operators in the industry for less than what lower-quality assets with less scale are selling in private markets,” the analyst summarized.
Overall, TipRanks shows that a large number of bulls like the odds on this caregiver. LHCG’s Strong Buy consensus rating is based on 8 reviews, including 7 Buys and only 1 Hold. The stock is priced at $165.44 and their average price target of $238.25 suggests room for upward growth of 44%. (See LHC stock analysis on TipRanks)
Quotient technology (QUOTES)
The last inventory we look at, Quotient Technology, uses data solutions to improve marketing activities. The company works with customers to generate personalized digital coupons for e-commerce and rewards programs. Quotients uses online shopping histories and purchasing behavior, along with site traffic data, to create precisely targeted coupon programs.
As economic activity has increased as the COVID crisis subsides, Quotient has seen revenues grow in fits and starts. For 2Q21, revenue of $123.8 million was up 48% year-over-year and ~5% above analyst expectations. This was in contrast to earnings per share, which came in at -$0.18 against a forecast of -$0.10. Compared to the same quarter last year, however, second quarter earnings per share were an improvement of 3 cents.
Quotient has been working to expand its product offerings and customer base, and earlier this month announced a partnership with Figg, a digital advertising platform for US financial institutions, banks and fintechs. The move makes Quotient’s product-level digital promotions available to an additional 100 million registered cardholders.
While Quotient has reported healthy earnings and useful expansions, the loss of earnings per share has kept investors busy. The stock has fallen 35% so far.
Colliers analyst Steven Frankel sees Quotient in the midst of a turnaround, with better times ahead. He describes his outlook for the company in optimistic terms: “While the path to margin expansion is not going as smoothly as we expected, the company is playing a game that could lead to significantly higher gross margins and strong revenue growth. We believe the company is making the right investments for the long term, especially as more products move from high-touch to more of a self-service licensing model…”
The analyst added: “We believe that when management executes its game plan, the company’s previous reputation as that digital coupon company with a less than excellent track record will be replaced by a vision of Quotient as a powerful Ad-Tech platform armed with first-party data on more than 100 million consumers, delivering high ROI promotional and marketing campaigns for its retail and CPG partners.”
Based on the above, Frankel is recommending buy QUOT stocks, and his $25 price target gives confidence in robust upside potential of 306% for one year. (To view Frankel’s track record, click here)
While there are only 3 recent reviews on Quotient’s stock, they all agree that this is one to buy – making the Strong Buy analyst’s consensus unanimous. The stock is priced at $6.15 and the average target of $17.67 suggests an impressive ~187% advantage. (See QUOT 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.