Every investor wants to buy into a stock that’s primed for growth. The trick in successful investing is finding those stocks. What makes this difficult is the truth of the old market cliché, that past performance will not guarantee future returns.
Indeed, past performance may not be a guarantee of a bright future, but it is the dataset investors have available, and it’s natural to consult it. And when stocks show a record of strong share price appreciation, sustained over an extended period, it is a signal that investors should take seriously.
So how can you put together a growth portfolio, one that will continue on the path of high returns? One place to start is with the Wall Street analysts, the professional stock experts who scour the market regularly. A retail investor seeking a growth profile can look for stocks with Strong Buy ratings paired with solid upside potential.
PDS Biotechnology (PDSB)
We’ll start with PDS Biotechnology (NASDAQ:), a clinical-stage biotech firm working on immuno-oncology, a cutting edge field in cancer research. PDS is focused on boosting the immune system to produce greater numbers of T-cells, the active cells that attack disease causing agents in the body; the company’s aim is to develop an overwhelming attack that will hit tumors with greater force than they can withstand. PDS uses its proprietary Versamune platform to develop disease-specific antigens with applications in both cancer immunotherapy treatments and infectious disease.
The company’s most advanced drug candidate, PDS0101, is currently undergoing several separate trials as treatment for different diseases. In a Phase 2 study led by the National Cancer Institute, PDS0101 was investigated in patients with HPV16-positive cancers, who had relapsed for failed in chemotherapy treatments. The drug was seen to reduce tumors in 5 out of 6 patients, and in 7 of 12 who also had failed checkpoint inhibitor therapy. The results are considered positive, and further testing is planned.
Sound clinical trial results always help a biotech firm, and PDS’ shares are up 597% so far this year.
Analyst Louise Chen, with Cantor Fitzgerald, likes what she sees in PDS0101, especially the drug’s multiple concurrent trials which give it several simultaneous shots on goal.
“We believe the peak sales potential of PDSB’s pipeline is underappreciated. Therefore, upwards earnings revisions, driven by pipeline advancements, should move the stock higher, in our view. Potential catalysts include: 1) Phase (Ph) 2 trial of PDS0101 + Keytruda for 1L treatment of HPV associated metastatic/recurrent head and neck cancer, data 4Q21/1Q22, 2) Ph 2, investigator initiated clinical trial evaluating PDS0101 + chemoradiation in patients with advanced cervical cancer, data 1H22, 3) Completion of enrollment in NCI (National Cancer Institute) HPV associated cancer trial 1Q22,” Chen noted.
In line with her upbeat outlook, Chen rates this stock an Overweight (i.e. Buy), and her $25 price target implies a one-year upside of 67%.
Wall Street agrees with the potential here; that is clear from the unanimous Strong Buy consensus rating based on 7 recent positive reviews. The shares are priced at $14.95 and their $19.67 average price target gives them an upside of ~32% in the year ahead. (See PDSB stock analysis)
Tenet Healthcare (THC)
Next up, Tenet Healthcare Corporation (NYSE:), is based in Dallas, Texas. This investor-owned, multinational healthcare services company operates, through its network of subsidiaries, 60 hospitals and over 460 outpatient clinics and other facilities, conducting over 8.6 million patient encounters annually through partnerships with over 50 health systems. In short, this is one of the major players in the patient-facing segment of the healthcare industry.
Like much of the economy, Tenet saw a dip in revenues starting in Q2 last year – but unlike the overall economy, Tenet’s losses were shallow. Even with the corona pandemic, Tenet was able to post $17.65 billion in total revenue last year.
The strong performance is continuing this year. In 2Q21, Tenet beat market expectations for both earnings and revenue. EPS came in at $1.10 compared to the $1.07 estimate – and it was well above the 83 cents reported in the year-ago quarter. Top line revenue of $4.95 billion was up 3.5% sequentially, but a more impressive 35% year-over-year.
Solid financials helped push the stock over the top, and THC shares have gained a robust 167% over the past 12 months.
5-star analyst John Ransom of Raymond James is impressed with Tenet’s ability to bounce back from corona – especially with the company’s restoration of regular hospital activities.
“…performance was strong across all segments, management highlighted that Hospital adj. EBITDA growth remains higher in states with more progressive reopening plans and sees this as a tailwind in 2H. USPI volumes are back to 100% of pre-pandemic levels with hospital surgery and outpatient visits at 96% and 95%, respectively…. we continue to find shares attractive and see the faster-than-expected recovery in volumes paired with the expansion of higher acuity procedures driving 2H performance,” Ransom opined.
Ransom uses these comments to back his Outperform (i.e. Buy) rating, and his $100 price target indicates room for 33% growth this year.
There are no fewer than 13 recent reviews of this stock, and they break down 10 to 3 in favor of Buy over Hold – all backing a Strong Buy consensus rating. THC shares are priced at $75.26, and their $83.62 average target implies ~11% upside from that level. (See THC stock analysis )
nVent Electric (NVT)
The last growth stock we’re looking at is nVent Electric (NYSE:), a contractor company that delivers a wide range of electrical system products. From wiring and grounding, to cabinets and packaging, to cooing and heating, to enclosures, fasteners, and support – if electrical systems need it, nVent provides it. The company’s products are found in a variety of industries, from concrete and construction to data centers and rail transport. nVent saw $1.998 billion in revenues last year, despite the pandemic crisis.
nVent has been working to expand through partnerships and acquisitions, and in recent months has completed several combinations. At the beginning of July, the company acquired CIS Global, a provider of intelligent rack power distribution and server slides products. This product line made a quality expansion of nVent’s own products, particularly in electrical system heat and power management.
In mid-August, nVent entered a strategic alliance with Power Resources International, in which the companies will work together providing rail and switch heating solutions to the transit industry in North America. The move is based on the continued strength of North American freight rail systems, which remain the predominant mode of long-haul carriage for bulk products in the US and Canada.
In 2Q21, nVent reported $601.3 million in sales, the highest figure in the past two years. All segments exceeded the year-ago quarter, and revenue as a whole was up 34%. EPS came in at 39 cents, for a 160% gain year-over-year.
All of this – the sound financials and the active expansion – has fed a share price that continues to grow. NVT is up 88% over the past 12 months.
Wolfe Analyst Nigel Coe believes the stock has more room to grow. Coe rates NVT an Outperform (i.e. Buy) along with a $43 price target that implies ~23% upside for the year ahead.
Backing his stance, Coe writes: “nVent delivered a solid performance in 2Q, beating our estimates across the board. The protagonist was Enclosures, which shone both on organic top line growth (+31.2% Y/Y) and margin expansion (+500bps Y/Y)…”
The analyst added, “NVT is one of only a handful of true value stocks remaining in EE/MI and we see scope for relative multiple expansion as sector valuation dispersion narrows on IP acceleration. NVT is trading at a wide discount vs. history and we think it is too cheap relative to quality.”
Overall, NVT shares have a unanimous Strong Buy analyst consensus rating, a show of confidence by Wall Street’s analyst corps. The stock is selling for $34.88, and the average price target of $41.83 implies ~20% growth in the year ahead. (See NVT stock analysis)
To find more ideas for stocks trading at attractive valuations, visit Investing Insights.