How are we going to find a way forward in today’s market environment? The general trend is upwards – the S&P 500 has gained 20% so far this year, and the NASDAQ is close behind at 19% – but market strategists at Goldman Sachs are predicting a pull back before the end of the year, and have scaled back their growth forecast for the S&P to from 6.2% to 5.7%. August’s weak jobs report and rising inflation prompted their shift.
Looking at the headwinds, Goldman’s Ronnie Walker says, “The Delta variant is already weighing on Q3 growth, and fading fiscal stimulus and a slower service-sector recovery will both be headwinds in the medium term.”
There’s no reason to wait for a market crash, or even a slowdown, to find stocks at low prices, that are primed for gains as we head into next year. We’ve used the TipRanks platform to look up several Strong Buy stocks, according to the analyst community, that have shown steep losses in recent months. Yet, the analysts remain bullish, and the stocks show significant upside potential. Here are the details.
Viemed Healthcare (VMD)
We’ll start with Viemed, a healthcare provider that occupies a unique niche in the industry. Viemed provides services and equipment for home-based therapy for patients with severe, chronic respiratory diseases, including chronic obstructive pulmonary disease (COPD), chronic respiratory failure, and other respiratory conditions caused by neuromuscular diseases. Among the services Viemed provides are respiratory disease management, oxygen therapy, sleep apnea treatment, and rental of ventilators and peripheral equipment.
Viemed has a large patient base for its services, with more than 25 million diagnosed cases of COPD in the US, and the Louisiana-based company operates in 23 states. Despite this, the company has seen its shares fall 33% in the past 12 months, and revenues and earnings are down, as well. Revenues, which peaked at $46 million 2Q20, have been falling ever since and came in at $26 million for 2Q21. EPS, at 4 cents, was flat from Q1 to Q2 this year, and down drastically from the 52 cents reported in 2Q20.
On some positive notes, 2Q21’s EPS was double the analyst expectations. In addition, Viemed reported a cash balance on hand of $31.2 million, against a long-term debt of $5.7 million. In a metric that bodes well going forward, the company saw its ventilator patient count grow 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 forward for this home health service provider.
“While the Company has begun to recover from the disruption of COVID-19, we sense gaining access to both existing referrers and new ones continues to be a challenge. The Company is continuing to hire and train respiratory therapists… We continue to believe VMD’s at-home model is the preferential treatment methodology for late-stage COPD patients, especially in a post-COVID environment where home-treatment continues to gain traction. We believe territory expansion, new rep additions, pent-up demand, and better hospital access will reaccelerate Viemed’s core organic growth. With cash building on the balance sheet, we believe a small-to-medium sized acquisition could occur in the intermediate term,” O’Neil opined.
In line with these comments, O’Neil sets a Buy rating on VMD shares, with a $15 price target to suggest an upside of 150% for the coming year. (To watch O’Neil’s track record, click here)
For the record, every one of the four Street analysts who have published ratings on VMD stock in the past month, has rated it a “buy.” On average, these analysts predict the stock will rise ~107% from its current price to race past $12.51 within the next 12 months. And that makes the stock a “strong buy.” (See VMD stock analysis on TipRanks)
LHC Group (LHCG)
Next up, LHC Group, is another healthcare service provider basin in Louisiana. But while Viemed, above, is focused on respiratory issues, LHC offers a broader range of services. The company, which operates in partnership with nearly 400 hospitals, provides home healthcare needs for patients suffering from acute illnesses, serious injuries, or chronic conditions. In addition, LHC provides hospice care for patients facing terminal conditions.
LHC benefits from a customer base that expands in tandem with the US population generally, and from offering home-based care services that are in demand post-COVID. The company has seen revenue growth of 12% from 2Q20 to 2Q21, with the current top line coming in at $545.9 million. EPS, at $1.20, was down from $1.43 in the year-ago quarter – but it is up sequentially for the third quarter in a row. Despite these gains, LHCG shares are down 22% this year.
In recent weeks, LCH has been expanding its services, especially in hospice care. On September 1, LCH completed its purchase of Heart of Hospice, expanding its service footprint in the states of Arkansas, Louisiana, Mississippi, Oklahoma, and South Carolina. LCH expects to realize approximately $92.5 million in annual revenue from this acquisition. In another hospice acquisition, LHC on September 8 entered an agreement to purchase Brookdale Health Care Services. The buy will add services in 23 home health locations, 11 hospice, and 13 therapy agencies across 22 states. In terms of revenue, LHC expects to see $146 million annually when the purchase is completed. Finally, LHC has moved to purchase two smaller hospice providers in Virginia. These smaller acquisition are expected to close in October, and to add $7 million in annual revenues for LHC.
Analyst Justin Bowers, of Deutsche Bank, writes of LHC path forward, “For 2022, we see improved Hospice margins as a major upside driver currently not in our numbers. LHCG plans to exit 4Q at a sustainable margin rate of ~15%. However, we are currently modeling Hospice margins at 12.6%, thus we see $10m of incremental upside if they can generate 15% margins in 2022.”
To this end, Bowers gives LHCG stock a Buy rating along with a $260 price target, implying an upside of ~57% in the next 12 months. (To watch Bowers’ track record, click here)
“We reiterate our Buy rating with the sell-off providing investors an opportunity to buy one of the best operators in the business for less than what lower quality assets with less scale are transacting in private markets,” the analyst summed up.
Overall, TipRanks shows a large amount of bulls liking the odds on this healthcare service provider. LHCG’s Strong Buy consensus rating is based on 8 reviews, including 7 Buys and just 1 Hold. The shares are priced at $165.44 and their $238.25 average price target suggests room for 44% upside growth. (See LHC stock analysis on TipRanks)
Quotient Technology (QUOT)
The last stock we’re looking at, Quotient Technology, uses data solutions to enhance marketing activities. The company works with clients to generate personalized digital coupons for e-commerce and rewards programs. Quotients uses online shopping histories and purchasing behaviors, along with site traffic records, to create precisely targeted coupon programs.
As economic activity has increased with the waning of the COVID crisis, Quotient has seen revenues creep up in fits and starts. For 2Q21, the top line of $123.8 million was up 48% year-over-year, and ~5% above analyst expectations. This was in contrast to the EPS, which came in at -$0.18 against a forecast of -$0.10. Compared to the year-ago quarter, however, Q2’s EPS was a 3-cent improvement.
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 will make Quotient’s digital, product-level promotions available to another 100 million-plus enrolled cardholders.
While Quotient has been reporting sound revenues and useful expansions, the EPS loss has been on investors’ minds. The stock is down 35% year-to-date.
Colliers analyst Steven Frankel sees Quotient in the midst of a sea-change, with better times ahead. He describes his outlook for the company in optimistic terms: “While the path to margin expansion is not as smooth as we had anticipated, the company is executing on a game plan that can deliver materially 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 as management executes its game plan, the company’s prior reputation as that digital coupon company with a less-than-stellar track record will be replaced by a vision of Quotient as a powerful Ad-Tech platform that is armed with first-party data on over 100M consumers, that delivers high ROI promotional and marketing campaigns for its retail and CPG partners.”
Based on the above, Frankel puts a Buy rating on QUOT shares, and his $25 price target indicates confidence in a robust one-year upside potential of 306%. (To watch 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 consensus unanimous. The shares are priced at $6.15 and the average target of $17.67 suggests an impressive upside of ~187%. (See QUOT 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.