Buying a stock at low prices would seem to be a no-brainer, the sure way to guarantee the best returns. However, most stocks that are priced low are down for a reason, and you’ll need to do your homework before buying in.
Some of the reasons are generally neutral towards the quality of the company. If a firm issues a new release of shares, to raise capital, the effect may be to dilute the stock and lower the price. Or, a company may get caught up in an economic downturn, and sees its shares fall due to a lack of buyers generally. Companies may also see share prices fall when there’s a major transition in upper management, and investors aren’t sure what the future will hold. All of this can happen to fundamentally sound companies.
Of course, stocks can fall when the company simply fails. Learning to tell the difference between short-term price declines, hard luck, and fundamental unsoundness is the key to finding winning investment among stocks that are flirting with price bottoms.
With that in mind, we’ve used the TipRanks database to find three stocks with relatively low prices, plenty of upside potential, and Strong Buy consensus ratings from the analyst community.
Let’s start in the biopharma sector, where Esperion focuses on lipid management, or cholesterol, as it’s more commonly known. Specifically, the Michigan-based company is working on the development of non-statin drug treatments for elevated LDL-C, the low-density lipoproteins that cause cardiovascular difficulties.
Esperion is fortunate to have an approved drug on the market. Bempedoic acid, the company’s flagship product, is available in oral tablet form under the trade names Nexletol and Nexlizet. It’s the first orally doses, non-statin, LDL-C lowering drug in the US.
The company has reported steady growth in prescriptions and revenue for its bempedoic acid products. Sales of the two trade name tablet increases by a combined 67% from Q1 to Q2, reaching $10.6 million. Prescriptions grew by 28% during Q2, and so far, over 47,800 patients have filled a bempedoic acid prescription. In the first half of 2021, the company saw $17 million in sales revenue, compared to $1.5 million in the first half of 2020.
Shares in ESPR have fallen 55% so far this year. The share depreciation came as the company’s net loss moderated; the $1.67 per share loss reported in Q2 was the lowest in the last 12 months – but it compares poorly to the $4.32 net profit reported in the year-ago quarter.
Also during Q2, Esperion saw management changes. The company brought in Sheldon Koenig as President and CEO, and JoAnne Foody as Chief Medical Officer.
Analyst Jason Butler, covering ESPR for JMP, sees the stock as fundamentally sound – and with good prospects going forward.
“Solid quarter showed robust demand growth and improving net price dynamics, which should continue through 2H22... Esperion reported 2Q21 earnings ahead of our and consensus estimates, with revenues falling slightly below expectations but offset by lower spending... We are encouraged by robust Q/Q prescription growth of 27% and the improved net price, recovering after the seasonal weakness and one-time headwinds in 1Q21, and driving sequential net sales growth of 67%. We look forward to the newly implemented commercial initiatives to drive continued, and potentially accelerating, growth in both demand and net price in 2H21 and into 2022," Butler opined.
In line with these comments, Butler rates ESPR an Outperform (i.e. Buy), with a $90 price target to suggest a whopping 651% one-year upside potential.
The 5 recent reviews on this biopharma company break down 4 to 1 in favor of Buy over Hold, and support the Strong Buy analyst consensus rating. Share are trading for $11.94 and the average target of $64 implies an upside of ~436%.
Paysign, Inc. (PAYS)
Shifting gears, we’ll look at Paysign. As its name suggests, this company lives in the online payment sector, where it works to create payment solutions for a variety of businesses and business applications. From digital banking to pharmaceutical industry, Paysign offers its customers employee rewards, affordability solutions, lower administrative costs, and streamlined operations.
For the recent Q2, Paysign reported increases in its business volume, especially the purchase transactions and the purchase dollar volume. These grew, respectively, by 19% and by 44% year-over-year. Total revenues showed a much more modest growth, of just 3%, to $6.7 million. The revenue number just missed the estimates, of $6.8 million.
Paysign ran its fourth net loss in a row, of $900,000 or 2 cents per share. This compared favorably to the 3-cent loss reported in Q1, although it was deeper than the 1-cent loss reported in the year-ago quarter. Year-to-date, shares in PAYS are down by 48%.
Paysign has taken a hit in recent months due to a quirk of its business structure. The company’s largest single line of business is with blood plasma donation centers; it provides pre-paid cards used to recompense plasma donors. The blood business took a hit during the COVID pandemic fears, mainly due to worries over virus transmission. This business is only now returning to normal.
Maxim analyst Michael Diana says that he is ‘bullish on revenue growth,’ and adds: “PAYS expects to add at least five new pharma programs in 2H21 (including co-pay assistance and incentive/awards programs), as well as receive 'breakage' revenue from existing pharma programs (remember that $6.2M of cumulative, previously booked breakage revenue was reversed in 3Q20 when an accounting change was made). Finally, the Paysign Business Card and the Paysign Premier Card (which is targeted mainly at customers who have an existing relationship with PAYS) should start to contribute in 2022.”
To this end, Diana rates PAYS a Buy along with a $6 price target. The analyst summed up, "Over the next four quarters, we expect stock price appreciation to our price target to produce an estimated return of about [153%].
The Strong Buy consensus rating on PAYS is supported by 3 Buys and 1 Hold, and the shares are trading at $2.38 after the lost ground this year. The average price target of $4.43 implies a one-year upside of ~87%.
We’ll wrap up with LendingTree, an online lending marketplace that uses the internet to make direct connections between lenders and borrowers. The company allows borrowers to pursue multiple loan options at once, making it possible for them to find the best terms on credit cards, deposit accounts, loans, insurance, and other financial products. The company is based in Charlotte, North Carolina, and saw more than $909 million in revenue during the ‘corona crisis’ year of 2020.
Business slowed last year, as the pandemic impacted business across the board, and the company’s 2020 revenues were down over 20% from 2019. Shares in LendingTree fell, too, and the stock is down ~40% so far this year.
There are signs that the company is turning around. Q2 revenues hit $270 million, a year-over-year gain of 46%. EPS for the quarter was 48 cents per share, compared to the $2.29 loss reported in the year-ago quarter. On a negative note, EPS was down from Q1’s $1.35.
Looking forward, LendingTree expects to see continued increases in loan customers. The company notes that the American NFL football season is starting up, stadiums are open, and fans are expected to spend money. In a survey of 2,100 people, the company found that 67% expect to spend more this football season than last year. And more consumer spending, of course, will require access to credit.
Even though the stock is down, Needham analyst Mayank Tandon, rated 5-stars by TipRanks, sees it as a buying opportunity.
"While tightening credit markets/FI marketing budgets pressured TREE's fundamentals at the onset of the pandemic, we are encouraged by the continued progress and upbeat outlook which gives us confidence that TREE has turned the corner and is well-positioned to return to steady growth. We remain positive on TREE as a leading consumer financial marketplace that is well positioned to generate consistent 15-20% revenue growth while expanding margins over the MT," Tandon wrote.
These comments back Tandon’s Buy rating, and his $275 price target suggests a one-year upside of ~71%.
Overall, LendingTree’s Strong Buy consensus rating is based on 3 unanimous positive reviews. The shares are priced at $161.79, and the $300 average target implies a 12-month gain of 88% for the stock.