Are the stars realigning? An unexpectedly good news in the October inflation print gave the markets a boost in the Thursday and Friday trading sessions. The S&P finished the week with a 6%, and moderated its year-to-date loss to 16%.
We still don’t know if this rally will be a short-term phenomenon in a larger bear market, or if it will turn out to be a more sustained bull run – but either way, investors can turn to the data to find solid stock choices.
But which data? If there’s one thing always certain in the stock market, it’s that trading activities generate mountains of information. This is where the TipRanks Smart Score comes in. This data gathering and collation tool brings together the facts on every stock, compiled and organized according to 8 factors, each one known to correlate with stock price performance, and distills them down into a single score on a scale of 1 to 10. Investors can tell at a glance where the stock stands – a score 1 or 2 shows an abundance of problems, while the Perfect 10 Smart Score is definite bullish signal for any investor to seek out.
So let’s take a dive into the Smart Scores, and find a couple of Perfect 10 choices for investors to consider.
The Chefs’ Warehouse (CHEF)
We’ll start in the specialty food niche, with Chefs’ Warehouse. This company has built itself up to be a one-stop shop for top chefs across North America, with warehouse operations and locations in the major metropolitan areas of both the US and Canada. The company got started 30 years ago and today serves a wide range of caterers, gourmet retailers, hotels, restaurants, making available every imaginable specialty food or ingredient, and the essential center-of-the-plate proteins.
Chefs’ Warehouse, until recently, was an exclusively North American operation. But that has changed with the announcement, early this month, that the firm has acquired Chef Middle East, a leading specialty food distributor operating in the UAE, Qatar, and Oman, and serving more than 3,000 customers. The acquisition, which cost Chefs’ Warehouse $100 million, gives the company an international footprint and an entry to the Gulf Cooperation Council’s business scene.
This move into the international market comes after Chefs’ Warehouse has seen a year and a half of generally rising revenues, signifying a strong rebound from the enforced shutdowns of the COVID pandemic. In the company’s most recent quarter, fiscal 3Q22 which ended on September 24, Chefs’ Warehouse showed top line revenue of $661.9 million, a gain of 36% year-over-year. The company finished the quarter with $145.4 million in cash and other liquid assets, and an adjusted EPS of 41 cents. This last metric was up an impressive 241% from the year-ago quarter.
The company’s solid financial performance has been accompanies by a 10% year-to-date stock price gain. It’s a major outperformance when compared to the S&P’s 16% decline over the same time frame.
Covering this stock for BMO Capital, analyst Kelly Bania believes that Chefs’ Warehouse is on the way up. She writes of its prospects, “We continue to view CHEF as an attractive small-cap stock with further upside, not only in 4Q where we see guidance as conservative, but also longer-term given CHEF’s strong execution and long runway for continued growth… CHEF continues to execute well against its longer-term goals and the strong YTD performance should continue to further help investors gain comfort valuing CHEF on its full profitability potential.”
Bania’s analysis leads her to rate the shares as Outperform (i.e. Buy), and her price target of $48 implies a one-year gain of ~31%. (To watch Bania’s track record, click here)
Overall, it looks like the Street agrees with the BMO take. CHEF shares have 5 recent analyst reviews, but they are all positive – giving the stock a Strong Buy consensus rating. The stock is selling for $36.72 and its $48 average price target is the same as Bania’s. (See CHEF stock forecast on TipRanks)
Clean Harbors (CLH)
We’ll switch our gears now to the environment and industrial services sector. Pushing industry into cleaner operations has the social winds behind it, and that impetus has propelled Clean Harbors’ stock to an 18% gain this year.
The company itself has helped by a solid performance – and delivery of a wide range of services. These include waste disposal, recycling, chemical packing and distribution, and household hazardous waste removal. In addition, Clean Harbors offers a variety of specialty industrial services, such as daylight and hydro excavations, and emergency response. The company even offers lodging and surface rentals in the oil and gas sector.
All of this brought the company solid revenues in the recent 3Q22, with the top line hitting $1.36 billion, up 43% year-over-year. The company’s net income was reported at $135.8 million, and adjusted EPS at $2.43. The net income showed a $70 million increase from 3Q21, while the EPS number was up 113% from the year-ago quarter.
All of this has been happening as the company is preparing for a succession. Founder and CEP Alan McKim is stepping down, and will be replaced by two long-term execs, COO Eric Gerstenberg and CFO Michael Battles, as co-CEOs. Such an upheaval might cause the Street’s analysts to worry – but Baird’s David Manthey, who holds a 5-star rating from TipRanks, while expressing ‘reservations about a co-CEO setup’ also says, “We have a great deal of comfort in both executives’ operational/strategic capabilities…”
Getting to the company’s position, Manthey writes, “3Q22 featured higher ES price/ mix and continued operational efficiencies driving sharply higher margins…. We see a good setup for continued solid pricing and deferred waste streams perhaps cushioning results, while PFAS/reshoring/increased blended oil sales could also augment our view.”
“Net,” Manthey summed up, “we see good upside as CLH trades at just 8x EV/2024E EBITDA on our recessionary estimates — the very low end of the historical NTM trading rang.”
This top analyst doesn’t stop with an upbeat comment; he also gives the shares an Outperform (i.e. Buy) rating and a $155 target price to indicates potential for ~34% share gains in the year ahead. (To watch Manthey’s track record, click here)
Overall, the Strong Buy consensus rating on this stock is based on 5 recent analyst reviews, breaking down 4 to 1 in favor of Buys over Holds. With a share price of $115.56 and an average price target of $143, the stock has an upside potential of ~24% for the next 12 months. (See CLH stock forecast on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a 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.
