With markets generally rising for now – the S&P is up over 9% in the past 30 days – investors are taking a close look at growth stocks. These are the equities that show long-term appreciation, with returns to investors based mainly on share price gains. It’s an obvious move to make, when the mood on the Street is bullish.
The professional analyst corps understand this, and they have been scouring the market for stocks that show signs of powerful growth ahead. These aren’t necessarily the big names – but they are likely to bring the returns that make investing profitable.
Dipping into the TipRanks database, we’ve pulled up the stats on three such stocks. They all have doubled or more so far this year, boast Buy ratings, and show double digit upside potential, according to Wall Street analysts.
Open Lending Corporation (LPRO)
Americans love their cars – but the financing sector is the real engine of automotive sales growth. Loan financing makes it possible for most people to maximize their purchase potential, and Texas-based Open Lending has inhabited that loan-niche for the past 20 years. The company offers loan analytics, automated decision capability, risk modeling, and risk-based pricing for automotive lenders. Open Lending went public on NASDAQ this past summer, through an agreement with Nebula Acquisition Corporation.
Since LPRO went public on the markets, the stock’s value has increased by an impressive 156%. The increase comes as revenues rose from $22 million in Q2 to $29 million in Q3, a 31% gain. Open Lending powers its revenue gains by targeting a new customer cohort in the automotive loan industry – near-prime customers, who have relatively low risk according to the data analysis, but don’t qualify for the prime rate loan products. Open Lending helps finance companies locate these customers – and offer them better rates than they have historically received. It’s a bold move in the auto loan industry, and judging by the revenue gains, it appears to be paying off.
Joseph Vafi, 5-star analyst with Canaccord, is impressed by Open Lending’s debut in the market, and its business model.
“In this analyst's experience, it is rare to see a new FinTech market entrant be able to garner just a few new customers and potentially accelerate its business model so much and so quickly,” Vafi said. “The real story here is the forward look and the potential for ‘exceptional’ P&L acceleration looking out into 2021/2022. This view is supported by material progress with auto OEM finance arm customers.”
Looking at the model, Vafi goes on to say, “Open Lending's value proposition expands well beyond just underwriting risk mitigation to extending balance sheet capacity for the lenders themselves. Given our view that the company's product rollout is still in its early innings relative to a quite large TAM, we see LPRO as capable of providing growth and EBITDA profitability at the high end of the FinTech peer group over the medium term.”
In line with his bullish commentary, Vafi rates LPRO shares a buy, and sets a price target of $35. This implies an upside potential of 28% for the next 12 months. (To watch Vafi’s track record, click here)
Overall, Wall Street agrees with Vafi on this one. The stock has 9 recent reviews, breaking down to 8 Buys and 1 Hold, making the analyst consensus here a Strong Buy. The average price target is $33.11, implying a 21% one-year upside. (See LPRO stock analysis on TipRanks)
Technological advance has allowed many chronic-care patients to maintain themselves at home, using medical devices and equipment to support their regular living – in their own homes. It’s one of the best features the medical system has developed over the past decades, and arguably has had one of the most positive impacts on people’s quality of life.
AdaptHealth is a medical equipment provider, offering patients a range of in-home equipment through a national network of providers. Adaptive equipment includes mobility, nutrition, ventilation, wound care, and more, all designed to keep patients living at home. While the approach is billed as empowering patients, in-home care also reduces costs for medical providers.
AdaptHealth has seen revenues rise through all of 2020. The top line grew from $191 million in Q1 to $232 million in Q2 to $284 million Q3 – in all, a 48% revenue increase in the first nine months of the calendar year. Along with the revenue gains, the stock has performed admirably. Shares in AHCO are up 210% this year.
AdaptHealth grows by expanding its network of providers, and in recent months the company has made four acquisitions. The company closed deals on AeroCare, Solara Medical Supplies, ActivStyle, and Pinnacle Medical Solutions – all providers of in-home health care equipment.
Deutsche Bank analyst Pito Chickering likes AHCO, describing the company’s year-to-date growth as “massive outperformance relative to most health care stocks.” The analyst believes that "despite the outperformance YTD there is plenty of upside left for AHCO.”
Going on, Chickering writes, “[We] believe core organic growth of 8-10% will compound through the year, as well as a good balance sheet and free cash flows which would allow for additional tuck-in deals. Ultimately, we believe the multiples could expand into the home health range."
Overall, Chickering has a Buy rating on AHCO shares, and his $47 price target implies nearly 39% upside from current levels. (To watch Chickering’s track record, click here)
The Strong Buy analyst consensus on AHCO is unanimous, based on 7 recent Buy reviews. The shares are selling for $33.79, and the $40.93 average price target suggests room for 21% growth in 2021. (See AHCO stock analysis on TipRanks)
Camping World Holdings (CWH)
The last stock on our list is a camping supplies company, specifically, a retailer of RV and related gear. Camping World Holdings owns the largest share in that niche, and has seen its business grow during the coronavirus crisis – RVing is a viable, and socially distant consistent, mode of leisure in these times. The company’s network, over 200 retail locations, is spread across 36 states.
CWH has seen steady growth at both the top and bottom lines during this pandemic year. Revenues were $1.03 billion in Q1; they hit $1.68 billion in Q3. Earnings, which showed an 11-cent loss in the first quarter, spiked to an impressive $1.44 per share in the third.
Share value has reflected the earnings. While the company saw a dip in Q1, during the mid-winter market crash when the coronavirus prompted economic shutdowns, the stock has more than fully recovered. CWH shares are now trading up 111% year-to-date.
Covering this stock for JPMorgan, analyst Ryan Brinkman says, “[S]tructural demand tailwinds relative to consumers looking to travel in such a way as to avoid contraction of COVID-19 seems set to continue to more than outweigh the cyclical headwinds impacting demand in many other end-markets. This growing demand, coupled with the company’s improved execution that resulted in breakout 2Q EBITDA performance, assuages earlier concerns relative to execution and leverage.”
Brinkman’s $45 price target for CWH suggests 50% growth in the coming year, and supports his Overweight (i.e. Buy) rating. (To watch Brinkman’s track record, click here)
All in all, the almost evenly split analyst reviews – 2 Buy and 3 Hold – makes the consensus view here a Moderate Buy. Shares in CWH are priced at $30.10 and have an average price target of $38.40, which implies 28% upside potential for the next 12 months. (See CWH 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.