Buy cheap? Even on the stock exchange, buyers like to find a bargain. Defining a good deal, however, can be tricky. There is a stigma attached to low stock prices, based on the fact that most stocks don’t fall for no reason. And those reasons are usually rooted in some facet of poor business performance.
But not always, and that’s why it can be difficult to find good deals. There are many low-priced stocks with strong fundamentals and solid future prospects, and these options allow investors to “buy low and sell high”. These are the stocks that Warren Buffett had in mind when he said, “Whether it’s socks or stocks, I like to buy quality goods when they’re marked down.
Using the TipRanks database, we’ve identified three stocks that have both low prices right now and strong upside potential for the year ahead. Not to mention, each gets a consensus “Strong Buy” rating from the analyst community. Let’s dive in and find out what drives this perspective.
MYT Netherlands (MYTE)
We will start with a European holding company, MYT Netherlands, whose subsidiary Mytheresa is an e-commerce leader based in Germany. The online store offers a wide range of ready-to-wear products, for women, men and children, as well as shoes and accessories. Mytheresa focuses on luxury goods, and shoppers can find top brands like Gucci, Veneta, Burberry, Dolce & Gabbana…the list goes on. MYTE went public in New York in January last year, and in its first fiscal year as a public company, 2021, recorded more than 612 million euros ($694 million) in total net sales. .
In its first four publicly disclosed quarters, Mytheresa’s revenue remained in a narrow range, between $186 million and $198 million. Earnings were more volatile, ranging from 6 cents to 24 cents per share. The most recent figure, 11 cents per share in the first quarter of fiscal 2022, was up 10% sequentially, and a sharp turnaround from the year-ago quarter’s net loss of 10 cents.
Despite these gains, MYTE shares are down 54% in the past 12 months. On the Societe Generale cover, analyst Abhinav Sinha explains why he sees this drop as an opportunity for investors: high growth prospects, strong margins and a solid balance sheet. In this context, we believe that the current share price is attractive.
The analyst sees the company able to maintain “decent and sustained profitability”, writing: “We expect a stable medium-term EBITDA margin at around 9% (2022-24e) supported by the following: 1) MYT’s custodial-focused custodial proposition, with its strong track record of pricing discipline reducing the risk of gross margin declines (the key indicator for judging a 1P business); 2) Mytheresa’s relative immunity to current supply chain disruptions, as stand-alone shipping/transportation costs are only 5-6% of sales, thus protecting EBIT margin from current cost escalation transportation, and the majority of MYT’s supply comes from Europe (close to its logistics hub in Germany).
In line with his bullish approach, Sinha gives MYTE shares a Buy rating and his price target of $15 suggests an impressive 75% upside potential for the coming year.
Wall Street is generally bullish here, as shown by the Strong Buy consensus rating, based on a 3-to-1 edge of buys over bookings. The stock is selling for $14.26 and its average target of $32.25 implies a 126% upside over 12 months. (See MYTE stock forecast on TipRanks)
Black Knight (BKI)
Next up is a tech company, Black Knight. This company provides data and analytics solutions and software for the real estate and mortgage finance industries. Black Knight is headquartered in Jacksonville, Florida, a fast growing city in one of the fastest growing states in the country. The company’s software and data solutions automate mortgage lifecycle processes, including loan origination, ongoing service and default if necessary. Black Knight empowers its clients to effectively manage risk and improve their financial performance.
Rising house prices have been good for business. Black Knight recently reported on the magnitude of the increase, noting that rising real estate values during 2021 have given owners a 35% increase in “workable equity”, the amount available to be used as liquid assets. . This translates to a $2.6 trillion increase in overall real estate values, a jump driven by home sales.
A look at Black Knight’s own earnings over the past two years confirms the impact of rising home values on mortgage managers and facilitators. The company has had six consecutive quarters of sequential revenue gains, and the most recent report, 3Q21, showed $378 million in revenue, up 21% year over year. EPS came in at 60 cents, for a 15% year-over-year gain.
Despite those gains, BKI shares are down 20% since hitting a high last December. Oppenheimer analyst Dominick Gabriele sees the stock’s heightened volatility as symptomatic of an upcoming housing market downturn, but doesn’t necessarily see it as a reason to drop the stock.
“We think the relative sell-off in BKI stock versus NASDAQ likely represents more than headwind to the current Fannie, Freddie, and MBA creation forecast… BKI’s ability to sell new platforms, to sell in a to leverage/maintain its dominant registered account market share while targeting M&A offers investors a more stable and unique way to play in the mortgage industry through less cyclical technology revenue underwriting. Given accelerating revenue growth, increased LT margin and market positioning combined with a valuation discount to historical norms, we believe today represents an opportunity to one-time purchase for investors,” explained Gabriele.
To that end, Gabriele gives BKI an outperform (i.e., buy) rating, and his price target of $93 implies roughly 40% year-over-year upside potential. (To see Gabriele’s track record, Click here)
Overall, this stock has received 4 recent stock ratings and they include 3 Buys to 1 Hold, for a Strong Buy consensus rating. The average price target of $82 indicates room for growth of 23% from the current trading price of $66.60. (See BKI stock forecast on TipRanks)
Cue Biopharma (SIGNAL)
Last but not least, Cue Biopharma, a clinical-stage company working on new treatments in the field of immunotherapy, specifically a new class of injectable biologic drugs that will directly engage and modulate selected T cells. This approach has applications in multiple fields, including cancer treatment, infectious diseases and autoimmune diseases. Cue uses two proprietary biological platforms, Immuno-STAT and Neo-STAT to develop its pipeline drug candidates. CUE shares peaked in November and since then the stock has fallen 65%.
Even though the stock fell, the company showed progress in its research program. Most of the company’s pipeline is still in preclinical development, but the cancer treatment research track includes two drug candidates that are ready for release. One, CUE-101, is in a Phase 1 clinical trial for the treatment of squamous cell carcinoma of the head and neck; the other, CUE-102, has recently passed significant development milestones.
In a Jan. 5 announcement, Cue said CUE-102 has shown potential in preclinical studies for activity against Wilms tumor 1 (WT1)-specific cytotoxic CD8+ T cells. This makes it a strong candidate for clinical trials in the treatment of WT1-expressing cancers. Cue is developing this candidate in partnership with LG Chem Life Sciences and will now receive a milestone payment of $3 million, under the terms of its agreement with LG Chem. A filing for an experimental new drug is scheduled for 1Q22.
On the company’s human clinical trial of CUE-101, Cue announced in late January that the drug, in combination with Keytruda, had shown progress in four patients on dose escalation. Two showed partial objective responses, while two showed overt reductions in target lesions.
Cue is covered by Craig-Hallum analyst Robin Garner, who is impressed with the early clinical results and potential of CUE-101. He writes, “We believe that CUE is undervalued at the current price based on CUE-101 monotherapy and doubling the efficacy of SOC in difficult-to-treat HNSCC…There is evidence of reduction growth in target lesions in the four front-line patients in the dose-escalation of the combined study… CUE-101 represents an emerging solution to improve therapeutic benefit and expand patient access to checkpoint inhibitors.
Consistent with those comments, Garner assigns CUE stock a Buy rating and a price target of $28, indicating confidence in a 345% year-over-year upside. (To see Garner’s track record, Click here)
Overall, this stock enjoys a unanimous Strong Buy consensus from the street, based on 6 positive stock ratings. The stock is currently selling at $6.29 and its average target of $27.67 suggests it has a decidedly robust upside of 340% behind the scenes for 2022. (See CUE stock forecast on TipRanks)
To find great stock trading ideas at attractive valuations, visit TipRanks’ Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock information.
Warning: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
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