Whether markets move up or down, every investor loves a bargain. There’s a thrill in finding a valuable stock at low, low price – and then watching it appreciate in the mid- to long-term. The key here for investors is finding options in which the risk/reward combination will work toward long-term advantage.
So, how are investors supposed to distinguish between the names poised to get back on their feet and those set to remain down in the dumps? That’s what the pros on Wall Street are here for.
Using TipRanks’ database, we pinpointed two beaten-down stocks the analysts believe are gearing up for a rebound. Despite the hefty losses incurred over the past 52 weeks, the two tickers have scored enough praise from the Street to earn a “Strong Buy” consensus rating.
Theravance Biopharma (TBPH)
We will start with Theravance, a biopharmaceutical company that focuses on developing organ-specific medications. It’s current pipeline includes drug candidates for the treatment of inflammatory lung and intestinal conditions, as well as neurogenic
orthostatic hypotension. The research programs range from Phase 1 to Phase 3 trials.
Theravance already has YUPELRI on the market as a COPD treatment. YUPELRI underlies the lion’s share of Theravance’s revenue, which in Q3 reach $18.3 million. This was up 47% year-over-year, and was driven by a 124% increase in YUPELRI sales.
Of more immediate interest to investors is Trelegy Ellipta, GlaxoSmithKline’s new once daily inhaler medication developed as a maintenance treatment for asthma, which was approved by the FDA in September, 2020. This approval will give Theravance a slice of the income on a drug with a broad potential audience, as asthma affects more than 350 million people globally. Theravance owns royalty rights on Trelegy, with income estimated at 5.5% to 8.5% of total sales. Trelegy was initially approved in the US as the first once-daily single inhaler triple therapy for the treatment of COPD.
Like many biopharmas, Theravance has high overhead and its approved drugs are at the start of their profitable lives. This keeps the net earnings and revenues down, at least for the near-term, and leads to a discount share price – TBPH has slipped 32% over the past 52 weeks.
Covering the stock for Leerink, analyst Geoff Porges remains bullish on Theravance, mainly due to the combination of its robust pipeline and its approved treatments for lung diseases.
“Theravance’s respiratory medicines are its key near-term valuation drivers… We still forecast ~$2.4B in WW Triple sales at peak (2027E). Beyond TBPH’s commercial/partnered assets, the company is also developing an improved JAK inhibitor (JAKi) partnered with JNJ (OP) for inflammatory bowel disease (IBD), and a norepinephrine and serotonin reuptake inhibitor (NSRI) TD-9855 (ampreloxetine) for neurogenic orthostatic hypotension (nOH). Each of these drugs leverages novel delivery of unique compounds against proven mechanisms-of-action and could offer superior safety and/or treatment effect, from their wider therapeutic windows,” Porges noted.
To this end, Porges rates TBPH an Outperform (i.e. Buy) and gives it a $35 price target, implying an impressive one-year upside of 104%. (To watch Porges’ track record, click here)
Overall, there are 5 reviews on file, and all are to Buy, making the Strong Buy consensus unanimous. TBPH shares are priced at $16.95, and their $33.60 average price target suggests a 97% upside from that level. (See TBPH stock analysis on TipRanks)
NiSource, Inc. (NI)
We will start with a utility holding company, with subsidiaries in the natural gas and electricity sectors. NiSource provides power and gas to over 4 million customers in Indiana, Kentucky, Maryland, Massachusetts, Ohio, Pennsylvania, and Virginia. The majority of NiSource’s customers, about 88%, are in the gas sector; the company’s electric operations serve customers in Indiana only.
The company saw revenues in the third quarter come in at $902 million, down from $962 in the prior quarter and $931 in the year-ago quarter. Overall, however, revenues have conformed to the company’s historic pattern: The second and third quarters are relatively low, while the top line increases with cold weather in Q4 and peaks in Q1. This is typical of utility companies in North America.
Despite the lower year-over-year revenues, NiSource has felt confident enough to maintain its dividend payment, holding it steady at 21 cents per common share through 2020. This annualizes to 84 cents, and gives a yield of 3.8%.
Not only has the company felt confident to pay income to shareholders, it has also felt confident to invest heavily in renewable energy resources. The company has a FY20 capital spending plan exceeding $1.7 billion, and is guiding toward $1.3 billion for FY21. These expenditures will fund ‘green’ energy projects.
NI is currently trading at $21.67, a striking distance from its 52-week low. One analyst, however, thinks this lower stock price gives investors an attractive entry point today.
Argus analyst Gary Hovis rates NI a Buy along with a $32 price target. This figure implies a 48% upside from current levels. (To watch Hovis’ track record, click here)
“NI shares appear favorably valued at 18.1-times our 2021 EPS estimate, below the average multiple of 21.6 for comparable electric and gas utilities,” Hovis noted. “NiSource could also become a buyout target, as larger utilities
and private equity firms have purchased smaller utilities because of
their stable earnings growth and above-average dividend yields.”
Overall, Wall Street sees a clear path forward for NiSource – a fact clear from the unanimous Strong Buy consensus rating, based on 3 recent Buy-side reviews. The shares are selling for $21.68, and the average price target of $28.75 suggests an upside of ~32% on the one-year timeframe. (See NI stock analysis on TipRanks)
To find good ideas for beaten-down stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.