Investing is all about profits, and part of generating profits is knowing when to start the game. The old adage says to buy low and sell high, and while it’s tempting just to discount cliches like that, they’ve passed into common currency because they embody a fundamental truth. Buying low is always a good start in building a portfolio.
The trick, however, is recognizing the right stocks to buy low. Prices fall for a reason, and sometimes that reason is fundamental unsoundness. Fortunately, Wall Streets analysts are busy separating the wheat from the chaff among the market’s low-priced stocks, and some top stock experts have tagged several equities for big gains.
We’ve used the TipRanks database to pull up the data and reviews on three stocks that are priced low now, but may be primed for gains. They’ve been getting positive reviews, and despite their share depreciation, they hold Buy ratings and show upwards of 80% upside potential.
Vapotherm, Inc. (VAPO)
First up, Vapotherm, is a medical device manufacturer, specializing in heated, humidified, high-flow nasal cannulas. These are therapeutic breath aids, designed to deliver oxygenated air directly to the patient’s nose. Heating and humidifying the air reduces the discomfort of delivering dry oxygen.
As can be expected, during a pandemic of a respiratory illness, Vapotherm saw high sales in recent months – but the share price has pulled back since early February. Paradoxically, the two events are related.
First, on the positive side, Vapotherm’s 1Q21 financial results were solid. The company’s revenue, at $32.3 million, was up 69% year-over-year, and worldwide, installations of the Precision Flow base unit was up 73% over the same period. The company’s net loss in the quarter, $5.2 million, was an improvement from the $10.2 million loss in the year-ago quarter.
On the negative side, VAPO shares are down from their early-February peak. The drop is substantial; the stock has fallen 50% from its peak, and is down 34% year-to-date.
The fall in share value reflects concerns that the company’s flagship product is oversold, that customers, fearful of COVID-related respiratory emergencies, bought more units that would be needed in ordinary times. This is the case made by Piper Sandler analyst Jason Bednar.
“Shares have meaningfully underperformed since early February as many investors have questioned utilization dynamics for the bolus of Precision Flow systems that were sold into hospitals last year… We understand the logic here, particularly for those investors with a shorter time horizon, but with much of that concern seemingly already reflected in the stock at current levels we do believe the upside opportunity meaningfully outweighs the risk of further downside,” Bednar noted.
The analyst added, “It’s also our view that investors who wait for utilization trends to bottom out will ultimately miss an initial move higher that could come as HVT 2.0 begins to contribute with a rollout later this year and as market expanding opportunities for HVT 2.0 in 2022 begin to take on a more defined shape (particularly EMS and home-based care).”
To this end, Bednar rates VAPO an Overweight (i.e. Buy), and his $32 price target implies a robust upside of 81% in the year ahead. (To watch Bednar’s track record, click here)
Overall, the unanimous Strong Buy consensus rating on this stock, supported by 4 recent analyst reviews, makes it clear that Bednar is not alone in his bullish view. The average price target here, $39, is even more optimistic, suggesting an upside of ~122% from the current trading price of $17.65. (See VAPO stock analysis on TipRanks)
Emergent Biosolutions (EBS)
The next stock we’re looking at, Emergent, is a biopharmaceutical company. The company has multiple products on the market, including a NARCAN nasal spray for use on opioid overdose patients, and vaccines against smallpox, anthrax, and other diseases.
Emergent’s development pipeline includes a pediatric cholera vaccine, Vaxchora, currently in a Phase III trial. Several programs, including an anthrax vaccine candidate, a Chikungunya vaccine, and a seasonal flu shot, have all completed Phase II and are in preparation for Phase III.
One of Emergent’s most important programs is in its Contract Development and Manufacturing service, a service extended to other pharmaceutical companies to manufacture vaccines which they have developed. Under a CDMO plan, Emergent is part of Johnson & Johnson’s manufacturing chain for a COVID-19 vaccine.
That last is a key point. The J&J vaccine has been linked – at least in some reports – to serious adverse events, particularly blood clots in otherwise healthy recipients. That has caused a hold in manufacturing of the vaccine, and consequently a delay in receiving payments from J&J. Which, in turn, impacted the company’s 1Q21 financials, resulting in lower revenues and earnings than expected. Investors are concerned, and the stock has fallen 33% year-to-date.
Despite the setback, Benchmark analyst Robert Wasserman keeps a Buy rating on EBS shares, along with a $120 price target. If correct, the analyst’s objective could deliver one-year returns of 101%. (To watch Wasserman’s track record, click here)
“EBS remains solidly profitable, and even with the lowered expectations for J&N and AZ vaccine contracts, is expected to show solid revenue growth for this year. These shares remain a bargain in our CDMO/bioprocessing group and could offer significant upside for value-oriented investors if circumstances turn around or new business can be garnered in the near-term,” Wasserman opined.
Overall, the Street currently has a cautiously optimistic outlook for the stock. The analyst consensus rates EBS a Moderate Buy based on 3 Buys and 2 Holds. Shares are priced at $59.59, and the average price target of $89.67 suggests an upside potential of ~50% for the next 12 months. (See EBS stock analysis at TipRanks)
Haemonetics Corporation (HAE)
For the last stock on our list, we’ll stick with the medical industry. Haemonetics produces a range of products for blood and plasma collection and separation, as well as software to run the machines and service agreements for maintenance. In short, Haemonetics is a one-stop shop for blood donation centers and hospital blood banks. Blood products is a $10.5 billion market in the US alone, with plasma accounting for 80% of that, and Haemonetics has made itself an integral part of that business.
Haemonetics had been recovering steadily from a revenue dip at the height of the corona crisis, and its 3Q fiscal 2021 earnings showed a solid results: top line revenue of $240 million and EPS of 62 cents. While the revenue was down 7.3% yoy, EPS was up 6.8%.
Even with that, however, the stock dropped sharply between April 15 and April 20, losing 42% of its value in that short time. The reason was simple. One of Haemonetics’ largest customers, CSL Pharma, announced that it does not plan to renew its contract with HAE. That contract, for supply, use, and maintenance of Haemonetics’ PCS2 plasma collection system, was worth $117 million and made up approximately 12% of the company’s top line. The cancellation comes with a one-time charge of $32 million in other related losses.
Fortunately for HAE, the CSL contract does not expire until June of 2022, giving the company time to plan and prepare.
Covering the stock for JMP Securities, analyst David Turkaly noted: “The advance notice gives HAE some time (~15 months) to prepare for the expiration, and we note that management has consistently strengthened its financial position using levers such as complexity reduction and product optimization to derive significant cost savings, and more of these will likely be employed ahead to help offset the customer loss.”
The analyst continued, “While this disappointing decision could impact HAE’s plasma positioning with other fractionators, we continue to believe that giving customers the ability to collect more plasma in less time is a very compelling value proposition – and HAE still has contracts and maintains significant market share with many of the most relevant plasma players.”
Accordingly, Turkaly rates HAE an Outperform (i.e. Buy), and sets a $110 price target. This figure implies an upside of 86% from current levels. (To watch Turkaly’s track record, click here)
All in all, HAE has a Moderate Buy consensus rating, based on 7 reviews that break down 5 to 2 in favor the Buys over the Holds. The stock is trading for $59.02 and carries an average price target of $108.67, which suggests ~84% one-year upside. (See HAE stock analysis at TipRanks)
To find good ideas for 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.