Looking ahead, Wall Street’s titans see tighter market conditions putting restraints on forward growth. The culprit isn’t so much consumer price inflation as it is high asset valuations after a 20-month bull run. Or, as Goldman Sachs noted, ‘all major asset classes [are expensive] relative to history.’ In this environment, with markets running hot, there’s simply limited upside remaining for 2022, despite the turndown that started the year.
So what to do? For investors seeking the best portfolio returns, this is the only question that matters. And the answer, perhaps in a bit of a paradox, may just lie in the stock market.
The pundits are predicting that long-term returns will be lower than last year – that makes sense. But just because the aggregate rate of return is down, doesn’t mean that there aren’t still high-growth stocks out there to run with.
We’ve used the TipRanks platform to look up three of them. These are Buy-rated equities that seen strong run-ups in price recently, putting them at their high-points for the past year. Let’s take a closer loo.
Pacira Pharmaceuticals (PCRX)
We’ll start with a specialty pharmaceutical maker, Pacira Pharma. Pacira, which focuses on post-surgical and acute pain relief, is a commercial-stage company, with three products already on the market. Pacira’s lineup of pain-relief products includes the flagship drug EXPAREL, used as an alternative to opioids in treating post-surgical pain; the iovera° system, a cryoanalgesia handheld device, which uses cold temperatures to deliver precisely targeted acute pain relief; and Zilretta, the first FDA-approved injectable microsphere treatment for osteoarthritic knee pain.
These approved and marketable drugs have brought Pacira a steady income stream and made it a profitable company. In the most recent reported quarter, 4Q21, Pacira showed total revenues of $159.2 million, up 22% from the year-ago quarter. This quarterly total included $139.9 million in EXPAREL sales (up 12% y/y), $4.9 million in iovera° sales (up 102% y/y), and $12.7 million in Zilretta sales. As the company’s sales have increased, the stock is up too, by ~40% over the past 4 months.
4Q21 was the first quarter in which Pacira recognized sales of Zilretta; the company acquired rights to the drug in November, following completion of its acquisition of Flexion. According to one analysis, Zilretta may reach $300 million in revenues by the end of next year and over $500 million by 2025.
However Zilretta may perform in two years, for now Pacira is getting a boost from record EXPAREL sales. The company’s flagship product posted total sales of $506.5 million last year, up 23% from 2020, making up 93% of Pacira’s total annual revenue.
Wedbush analyst Liana Moussatos puts EXPAREL front and center in her evaluation of Pacira, writing: “EXPAREL growth continues despite pandemic headwinds achieving record sales of $507 million. Sales were driven by 30% improvement in women’s health led by TAP blocks for c-sections and continue to represent a large segment for expansion with 1.3 million c-sections performed each year in the U.S.”
“EXPAREL February sales are up +17% year-over-year (+15% month-over month) signaling a rebound from late 2021/early 2022 and putting EXPAREL back on the forecasted mid-teens growth trajectory. With pandemic headwinds anticipated to subside, we maintain our Q1:22 EXPAREL sales forecast of $133.1 million ($55.1 million for March, +16% yoy),” the analyst added.
These comments support her Outperform (i.e. Buy) rating on the shares, and her $94 price target suggests that PCRX has a one-year upside of ~25%. (To watch Moussatos’ track record, click here)
Most analysts agree; the stock’s Strong Buy consensus rating is based on 7 Buys vs. 2 Holds. The average price target stands at $82.78, and could provide upside of ~10% in the year ahead. (See Pacira stock forecast on TipRanks)
Assurant (AIZ)
Next up is Assurant, a $10 billion insurance company. Assurant is a global provider of a variety of risk management products, offering home and renters insurance, lender-placed insurance, flood protection, financial services, vehicle protection, and even end-of-life services such as funeral expense policies. The company’s operations are divided into two broad segments, based on their targeted demographics: Global Housing, and Global Lifestyle.
Over the past two months, while most of the market has seen sharp losses, Assurant shares have climbed 23%. These gains came as the company reported sound financial results for Q4 and full year of 2021. For the quarter, Assurant had $2.47 in net operating income per share, beating the $2.30 forecast and gaining 52% year-over-year; this metric was reported as $9.36 for the full year, a 21% y/y gain. Assurant has seen five consecutive years of profitability.
At the top line, revenue was consistent with recent reports. Over the past two years, quarterly revenues have come in between $2.47 billion and $2.64 billion; for 4Q21, the number was $2.57 billion. Full year 2021 revs were $10.2 billion, essentially flat from 2020’s $10.1 billion.
In addition to growing earnings and share appreciation, Assurant offers investors a reliable dividend. The yield is modest – at 1.5%, but the key to the dividend is its stability, assuring a constant income stream. Assurant has kept up with the quarterly payments since 2004, and has been growing them steadily through that time.
Truist analyst Mark Hughes, who holds a 5-star rating from TipRanks, notes that Assurant’s solid financial footing gives it a foundation to increase its returns to shareholders. He writes, “Management foresees a balanced use of cash to both invest to support future organic growth and buy back stock at an attractive price… They specifically said they are not interested in extending into the broader home warranty category, but will instead continue to target the ‘connected home’ market with bundled services. There should be considerable resources for this balanced approach as the company has $1.0 billion in cash at the holdco and anticipates that essentially all the company’s net income – which we estimate to be $668 million this year – should be available for use in dividends, buybacks, or M&A.”
Based on the above, Hughes puts a Buy rating on AIZ stock, and his $210 price target implies an upside of ~17% for the coming year. (To watch Hughes’ track record, click here)
Assurant boasts a unanimous Strong Buy consensus rating, with 5 recent positive analyst reviews. The stock’s average price target of $195.20 indicates room for ~9% gain from the current trading price of $179.61. (See AIZ stock forecast on TipRanks)
Hudson Technologies (HDSN)
We’ll finish up this list with Hudson Technologies, a company specializing in ‘green’ refrigerant products. This is a specialty niche, but an important one; air conditioning tech is ubiquitous, and the coolants used in it are notorious polluters. Hudson develops, manufactures, and distributes cleaner, sustainable refrigerants for the general HVAC industry. The company’s products and services, which include refrigerant and industrial gasses, refrigerant management and reclamation, and decontamination, find their chief uses in commercial air conditioning and industrial processing.
The Biden Administration, and the current Democrat majorities in Congress, are pushing ‘green’ tech, and Hudson has capitalized on that. The stock has gained 300% in the last 12 months – but an even more impressive 476% since the advent of the Biden Administration. The company reported $37.8 million at the top line in 4Q21, the last reported, a value that was up from $22.1 million 4Q20.
On earnings, Hudson beat the forecast in Q4, bringing in 13 cents per diluted share in profits. This compared favorably to the 4-cent loss expected, and to the 11-cent loss reported in 4Q20. We should note here that Hudson’s lowest quarterly earnings of the year typically occur in Q4 and Q1, during the winter months. This is logical, for a company involved in HVAC coolant products.
Covering Hudson from Craig-Hallum, 5-star analyst Ryan Sigdahl notes several matters of product pricing potential that should boost the stock going forward: “We believe HDSN is well positioned with lean channel inventory, rising refrigerant prices, HFC phaseout starting and as the market leader in reclamation (35% market share)… Supply chain dynamics and refrigerant phaseouts benefitted pricing… We think margin will normalize closer to 30% in 2022 as HDSN acquires refrigerant at a higher price.”
“HDSN’s upside opportunity and earnings power potential given the EPA mandatedR-22 phase-out, DLA contract and long-term opportunity for HFC reclamation create an attractive long-term opportunity for shares,” Sigdahl concluded.
Sigdahl sets a Buy rating on HDSN shares, along with an $8 price target that indicates room for 27% upside in the next 12 months. (To watch Sigdahl’s track record, click here)
There are only 2 recent reviews of this stock, but both are positive and add up to a Moderate Buy consensus rating. Hudson’s stock is selling for $6.28 and it has an average price target of $7.25, giving the stock ~15% one-year upside potential. (See HDSN stock forecast on TipRanks)
To find good ideas for 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.
