The markets might have kicked off the year in a generally upbeat mood, but they have been zigzagging recently, making it even harder to know what direction stocks are heading in next.
That makes stock picking even more difficult than usual but there’s a tool that could come in handy here. The TipRanks Smart Score algorithm collects all the data required for stock picking purposes and sorts it out according to 8 factors - all known to correspond with future outperformance. Then those elements get boiled down to a single score between 1 and 10, with 10 naturally representing a stock that ticks all the right boxes and expected to push ahead from here.
Using the Smart Score tool, we’ve looked up two stocks that are currently displaying the Perfect 10 score. Both have already amassed some serious gains over the past few months but the Street’s analysts figure these Strong Buy stocks have more upside in store. Let’s see why.
Deckers Outdoor (DECK)
First up on our Perfect 10 list, Decker Outdoor, a global footwear company boasting a portfolio of leading brands; these include UGG, which sells premium footwear, apparel, and accessories; Sanuk has casual shoes and sandals and so does Teva; the Hoka brand offers athletic footwear while Fashion casual footwear is represented by Koolaburra. Most of the products are sold wholesale, but the company also has a growing direct-to-consumer segment.
Earlier this month, Deckers released results for the fiscal third quarter of 2023 (December quarter). Revenue grew by 13.4% year-over-year to $1.35 billion, beating the Street’s call by $90 million. The company also exceeded expectations on the bottom-line, delivering EPS of $10.48 - ahead of the $9.52 consensus estimate. Moving forward, Deckers expects full-year sales to come in between $3.50 billion to $3.53 billion; consensus had $3.53 billion.
Turning to the Smart Score, we find DECK firing on all cylinders. Hedge funds increased their holdings by 130,100 shares last quarter while the stock nabs both bullish blogger and news sentiment. On the fundamentals side, the stock has generated a 30% return on equity over the trailing 12 months.
While the markets were not overly impressed with the latest results, it should be noted that since hitting a bottom in May, the shares are up by 83%.
Covering this stock for BTIG, Janine Stichter lays out the bullish case. She writes, “In the current environment, we believe strong brands will fare best, and fit DECK's portfolio to a tee. UGG's continued strong execution and resonance with a younger consumer should support solid, steady growth, while we see HOKA continuing at a robust pace of expansion for years to come. Operating margins, while already best in class, have room to expand as freight headwinds ease, while the strong profitability and ability to reinvest for growth are a competitive advantage.”
Accordingly, the analyst assumed coverage with a Buy rating alongside a $515 price target. The implication for investors? Upside of 24% from current levels.
Over the past 3 months, 11 analysts have reviewed DECK’s prospects and the ratings come down 9 to 2 in favor of Buys over Holds, all culminating in a Strong Buy consensus view. Given the $484.73 average target, the stock is expected to climb 17% higher over the coming months. (See DECK stock analysis on TipRanks)
Poseida Therapeutics, Inc. (PSTX)
The only thing connecting our next Perfect 10 stock to the one above is that score. Poseida Therapeutics’ value proposition is an entirely different one, it being a clinical-stage biotech targeting the development of novel cell and gene therapies for the treatment of cancers and rare genetic diseases. This it does by using its proprietary platforms, which include piggyBac, Cas-CLOVER, and nanoparticle technologies.
The company currently has two allogeneic chimeric antigen receptor T cell (CAR-T) candidates that have reached the clinical testing stage. P-MUC1C-ALLO1 is indicated to treat solid tumors, and is currently being assessed in a Phase 1 clinical trial. Additionally, P-BCMA-ALLO1 is also undergoing Phase 1 testing for the treatment of relapsed and refractory (r/r) multiple myeloma (MM). This candidate is being evaluated in collaboration with Roche. In December, the company presented encouraging initial clinical data from both studies and intends to provide further updates at a medical meeting this year.
Where the Smart Score is concerned, Poseida’s Perfect 10 rating is based on several strong metrics, including 100% blogger sentiment and positive hedge fund activity - these increased their positions by 750,000 shares during the last quarter.
For H.C. Wainwright’s Arthur He, the positive outlook for Poseida rests on its potential to usher in a new era of cell and gene therapies.
“Despite the therapeutic success by current autologous CAR-T therapies, significant limitations remain, such as severe toxicities, limited efficacy in solid tumors, and high manufacturing cost, posing challenges to a wide adoption of the treatment,” He wrote. “We believe Poseida’s piggyBac and Cas-CLOVER technologies could potentially address these issues… We believe Poseida’s platforms have the potential to reshape the landscape of both cell and gene therapies. We currently project the company to generate risk-adjusted revenues of $1.3B in 2033, growing from $56M in 2027.”
Since bottoming out last May, PSTX shares have been on an almighty tear, having gained 302%. But He thinks there’s more gas in the tank; along with a Buy rating, his $15 price target makes room for additional gains of 99%. (To watch He’s track record, click here)
Other analysts also think there’s plenty more upside in store; the Street’s average target stands at $19.50, suggesting one-year returns of 159% are in the cards. With Buy ratings only – 3, in total – the stock claims a Strong Buy consensus rating. (See PSTX stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.