Buoyed by the December jobs report amidst signs that inflation might be on the backfoot, stocks entered the weekend on a high note, with all the major indexes planted in the green at the end of 2023’s first trading week. Nevertheless, the prevalent mood is still one of uncertainty and the trading environment is one that calls for insightful investing and skillful stock picking. 2023 might not be an easy year for investors, but there are tools available to help clear the path.
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The Smart Score, a data collection and collation tool from TipRanks, gathers data from thousands of publicly traded equities, and analyzes the accumulated information on each stock according to 8 separate factors, all proven to correlate with future outperformance. Taken together, these factors are distilled into a single score on a scale of 1 to 10, from worst to best, letting investors tell at a glance the main chance for any stock going forward.
It’s a rare bird of a stock that earns the ‘Perfect 10’ from the Smart Score – but those stocks make sound choices for investors seeking potential winners in tough times. So let’s take a look at a couple of lesser-known names that scored Perfect 10s. These are stocks that have slipped under-the-radar, missing the hype that attaches to big names – but they feature a recent history of market outperformance, Strong Buy consensus ratings from the Street, and solid upside potential looking ahead. Here are their details, presented with commentaries from Wall Street’s analyst corps.
Iron Mountain, Inc. (IRM)
Up first is Iron Mountain, an information storage specialist. This company is an industry leader in data management, with a solid enterprise customer base boasting most of the Fortune 1000 firms – among more than 220,000 others. Iron Mountain, with a market cap of more than $14 billion, annual revenues over $4.2 billion, and an impressive 98% customer retention rate, has clearly earned its leading market position, and is a component company of the S&P 500.
The S&P, like all of the indexes, is an average – and Iron Mountain was clearly on the outperforming side of it last year. Over the course of 2022, IRM shares remained stable compared to the 19% drop in the overall S&P 500 index. That share outperformance was bolstered by upward trends in the company’s top and bottom lines of revenue and earnings.
At the top line, Iron Mountain’s last reported quarter, 3Q22, showed total revenue of $1.29 billion, up 14% year-over-year, and a net income of $193 million – almost triple the $68 million net income from 3Q21. Adjusted EPS was reported as 48 cents, up 20% y/y.
While the EPS result beat the 44-cent forecast, the revenue total missed; the Street had been expecting $1.31 billion at the top line. However, the company came good on its full-year revenue outlook, sticking to its guide of between $5.125 billion – $5.275 billion, at the midpoint above consensus at $5.19 billion.
As far as the Smart Score is concerned, hedge funds increased their holdings by almost 53,000 shares last quarter, the financial bloggers are decidedly bullish (86%), while the return on equity shows 66% over the trailing 12-months.
Nate Crossett, in his coverage of Iron Mountain for BNP Paribas, comes down firmly on the bullish side, describing the company and its niche as ‘a cheap cash cow,’ and writing, “Given the large total addressable market of both industry segments – data center and ALM (asset lifecycle management) – relative to IRM’s current position, as well as a large storage customer base to ‘cross sell’ into, we believe IRM can meaningfully grow the cashflows of these business segments for the next several years… With an inflation indexed storage business, a growing data center platform, relatively lower funding needs, and a more attractive valuation profile, we are positive on IRM shares at these levels.”
Following this stance forward, Crossett has an Outperform (Buy) rating on the shares, and his price target of $66 suggests it has room to run up another 30% in the coming year. (To watch Crossett’s track record, click here)
The 4 recent analyst reviews on IRM shares break down 3 to 1 in favor of the Buys over Hold, backing up the Strong Buy analyst consensus. The stock has a trading price of $50.69 and its average price target of $59 indicates a 16% one-year upside potential. (See IRM stock analysis on TipRanks)
OneSpaWorld Holdings (OSW)
Next up, OneSpaWorld, exists in the health, wellness, and beauty sector. The firm acts as a holding company, operating 20 cruise line spa brands – and 4 more on land in 67 international resort spas. The company boasts that it visits over 1,100 ports of call ever year, on more than 7,900 voyages. OneSpaWorld provides a full range of spa services, including traditional and alternative massage, hair and nail treatments, body and skincare treatments, fitness, acupuncture, and medi-spa services.
The stock trades on the NASDAQ, which has fallen 30% in the last 12 months – but OSW shares are only down 9.5% in that same period.
The COVID pandemic era was hard on OneSpaWorld, as the lockdown and travel restrictions kept cruise ships in port and impacted global travel for more than a year – but the company’s revenues have been recovering since 2H21, and in 3Q22 OSW reported a return to positive earnings while the company also beat the forecasts on revenues and income.
Quarterly net revenues were reported at $162.3 million, up from just $43.6 million in the year-ago period – and a company record for a single-quarter top line. The total revenue also came in more than 20% above the forecast. The company saw a positive quarterly cash flow from operations of $12.5 million, and finished the quarter with $57.1 million in total liquidity.
Earnings, however, were the bigger news. After running steep quarterly losses for several years, 3Q22 showed a positive result of 13 cents per diluted share in adjusted income. This was more than double the 5 cents diluted EPS that had been forecast.
Turning to the Smart Score, OneSpaWorld has 100% bullish sentiment from the financial bloggers – who are usually a highly fickle lot. The hedges tracked for the score increased their holdings in OSW last quarter – by more than 370,000 shares. And the company’s returning on equity was more than 13% over the trailing 12 months.
Cowen analyst Max Rakhlenko likes what he sees in OneSpaWorld, and notes the company’s advantages for investors: “OSW is the dominant share leader in the outsourced spa market on cruise ships with operational moats, and a capital-light business model that should support elevated cash generation. We are constructive on growth opportunities driven by secular tailwinds & catalysts, and model +6.2% revenue growth CAGR & 7.3% EBITDA growth.”
Rakhlenko’s bullish stance supports his Outperform (Buy) rating here, and his price target, set at $13, implies that a gain of 42% is in store for the shares going forward. (To watch Rakhlenko’s track record, click here)
While this stock only has 3 recent analyst reviews on file, they are all positive – for a unanimous Strong Buy consensus rating. The stock’s $9.12 share price and $14 average price target combine to give a 53% upside potential on the one-year time-frame. (See OSW stock analysis on TipRanks)
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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.
