Not all stocks are equal. Some will generate returns, while others will harvest losses. Some will soar magnificently, while others will crash and find it hard to reignite. The eternal question for the intrepid investor remains unchanged, though; which are the ones bound for fortune and, conversely, which are the ones to avoid.
While nothing is certain, there are ways to help make the right decision. TipRanks’ Best Stocks to Buy tool tracks 8 key metrics and uses the results to score stocks accordingly. The tool displays the most compelling investments and gives them a Smart Score; from 1, down in the doldrums, all the way up to a “Perfect 10” at the peak of the summit.
In this case, the data crunching tool recognized 3 healthcare stocks, which not only display Strong Buy status but also earned a “Perfect 10” Smart Score. Let’s take a closer look at the data at hand.
Horizon Therapeutics (HZNP)
In the rollercoaster world of healthcare so much hinges on the FDA’s approval or rejection of a new drug. Of course, it’s imperative to look at the bigger picture, and realize what these companies are trying to achieve in terms of their respective therapies. There is no doubt, though, that especially in this sector, the market reacts dramatically to both good and bad news.
One such company looking forward to an FDA decision in the new year is biopharma Horizon Therapeutics. The company’s focus is on rare and rheumatic conditions, and a PDUFA date of March 8 will determine the future of Horizon’s teprotumumab drug, a treatment for active thyroid eye disease (TED). The disease can potentially lead to loss of vision and the drug could be the first treatment for TED to gain approval from the FDA.
Clinical trials in both Phases 2 and 3 have displayed positive data, and an approval will add the treatment to a portfolio that the company thinks will generate between $1.28 billion and $1.31 billion in net sales in 2019.
Piper Jaffray’s David Amsellem believes Horizon is "on the cusp of a seminal milestone." The analyst reveals in a note to clients that a recent physician survey indicated positive feedback for the drug and the approval of teprotumumab will lead to a "relatively high probability of wide adoption." Amsellem sees "ample room for significant further value creation” and thinks Horizon shares are set for multiple expansion.
Unsurprisingly, then, Amsellem reiterated his Overweight rating and raised his price target from $36 to $49, which represents a potential upside of 36% from current levels. (To watch Amsellem’s track record, click here)
The rest of the Street backs the Piper Jaffray analyst unanimously; all the analysts, 7 to be precise, tracked over the last 3 months, rate the biopharma a Buy; Therefore, Horizon has a Strong Buy consensus rating. The average price target of $40.57 indicates upside potential of 12%. (See Horizon stock analysis on TipRanks)
Aravive Inc (ARAV)
While the market has provided plentiful returns in 2019, not many have performed better than biotech Aravive. The micro-cap, which is focused on treatments for life threatening diseases, has added almost 300% to its share price throughout the year.
Aravive’s lead candidate is AVB-500, a treatment for ovarian cancer and IgA nephropathy (kidney fibrosis). Recent data from a Phase 1b clinical trial of the drug in platinum-resistant recurrent ovarian cancer patients displayed positive results, with the study showing that women taking the drug exhibited higher rates of progression free survival. It is still early, though, and the trial was small, with only 31 patients.
The company recently began a Phase IIa study of AVB-500 in IgA nephropathy patients, and Piper Jaffray’s Edward Tenthoff noted the predictive modeling shows that AVB-500 "should provide sufficient exposure for therapeutic efficacy and may support a pivotal trial start next year.”
The 5-star analyst reiterated an Overweight rating, alongside a price target of $31. This implies upside potential of an excellent 125%. (To watch Tenthoff’s track record, click here)
Further adding to the bull’s case is Cantor Fitzgerald’s Louise Chen, who believes “positive data readouts from Aravive's pipeline will drive shares higher.” Chen rates ARAV an Overweight alongside a $30 price target. (To watch Chen’s track record, click here)
Over the last three months, two other analysts have joined the bullish pair with an opinion on Aravive. Both also rate the biotech a Buy, which grants Aravive a Strong Buy consensus rating. The average price target of $28.50 implies upside potential of 109%. (See Aravive stock analysis on TipRanks)
DexCom Inc (DXCM)
The synergy between technology and healthcare is constantly on the rise. The development of new tech enables treatment focused companies to break new ground and solve people’s day to day issues in ways not possible only a few years ago.
This brings us to DexCom, the maker of the CGM (continuous glucose monitoring) system. The system enables diabetics to track and manage sugar levels by inserting a small sensor underneath the skin. The sensor measures glucose levels and through a transmitter which is fastened on top, wirelessly sends the data to a smart device.
Statistics have shown that over 30 million people had diabetes in 2015 (over 9% of the population) and a further 84 million adults have had prediabetes, which if not treated, is a possible gateway to full blown diabetes. Although the numbers are alarming, they present significant market opportunity for Dexcom’s sugar monitoring products.
The company has had an excellent 2019 and its share price skyrocketed over 80%. The recent third-quarter report helped continue the upward trend, with revenue of $396 million exhibiting growth of 49% from the previous year’s same period.
Merrill Lynch’s Travis Steed thinks Dexcom’s 2019 performance is set to continue in the new year and rates the stock a “top idea for 2020.” The 5-star analyst highlights the company’s “competitive moat” and thinks DexCom is undervalued by the Street.
Therefore, Steed reiterated a Buy rating on DXCM and raised his price target to $250 from $220. This conveys the analyst’s confidence in the company’s ability to add 14% to its share price over the next 12 months. (To watch Steed’s track record, click here)
Steed is not alone in his bullish thesis, as 12 Buys and a single Hold bestow Strong Buy status on the groundbreaking glucose tracker. The average price target of $220.82, though, implies only small upside of 1%. This could mean that the analysts haven’t updated their models yet to reflect its 2019 gain. (See DexCom stock analysis on TipRanks)