What can you make of the market’s standard disclaimer, ‘past performance cannot guarantee future returns.’ Should you avoid every stock that has shown enormous growth in recent months? Or should you ignore it, and focus on the fast-appreciating equities?
The savvy investor takes a smart middle path, treating stocks as individuals and evaluating them case by case. Past performance is no guarantee, but it can be an indicator, especially consistent, long-term performance. But that is only one part of the growth stock picture. Investors should also look for Wall Street’s view – are the analysts impressed by the stock? And in addition to that, how does the upside potential look like?
Now we have useful profile for monster growth stocks: gangbusters gains, Buy ratings from the Wall Street analyst corps, and considerable upside for the coming year. Three stocks in the TipRanks database are flagging all those signs of strong forward growth. Here are the details.
OptimizeRx Corporation (OPRX)
The ongoing health crisis has had a heady impact on our digital world, accelerating the move to put records and information online. OptimizeRx operates a digital platform that facilitates communication between the various branches of the health care environment – doctors, pharmacies, patients – at the point of care. The value of this service is clear from the stock’s massive gains in recent months: over the past 52 weeks, OPRX shares are up 277%.
It’s not just share gains that are high. Since 3Q19, the company has reported top-line revenue gains in every quarter. The most recent, 3Q20, saw revenues of $10.52 million, a record for the company. The year-over-year gain was 110%; for the first 9 months of 2020, the company’s revenues were $26.9 million – another record, and up 56% from the same period in 2019.
In other metrics, OptimizeRx reported having $12 million in cash on hand at the end of Q3, and reported that it had closed two additional enterprise deals in the quarter, bringing the total value of annualized recurring revenue to $21 million.
Roth Capital analyst Rick Baldry is impressed by OprimizeRx’s rapid growth, and is not shy about saying so.
“Given its RFP pipeline doubled yr/yr in 3Q20, we believe OPRX could accelerate organic growth to 100% in 2020… [We] note that OPRX’s RFP pipeline growth may not fully reflect its growth potential in 2021 given its recent machine-learning platform extension announcement (and related data partnership with Komodo Health which tracks 320M patients annually) was hidden from prospects while R&D and patents were pursued,” Baldry opined.
Overall, the 5-star analyst summed up, “Given we expect both material upside to current forecasts, OPRX is our 2021 Top Pick.”
In line with these bullish comments, Baldry rates OPRX a Buy, and his $70 price target implies an upside potential of 77% for the next 12 months. (To watch Baldry’s track record, click here)
Wall Street clearly agrees with Baldry, as shown by the unanimous Strong Buy consensus rating, based on 3 recent analyst reviews. The shares are selling for $39.54, and their $53.33 average price target suggests room for ~35% growth this year. (See OPRX stock analysis on TipRanks)
The Lovesac Company (LOVE)
Next up is a furniture company, known for its modular seating systems and beanbag seats. Lovesac offers customers an easily customizable seating arrangement capable of fitting any room, home, or style – and easily adaptable to owners’ changing moods. The company has been named one of the fasted growing furniture makers of the past decade, and reported $165.9 million in total revenue for fiscal 2019.
Lovesac’s growing revenues were clear in 3Q20, when the company reported net sales growth of 43.5% year-over-year, to $74.7 million. Net income switched from a $6.7 million loss in the year-ago quarter to a $2.5 million profit in this year’s Q3. Gross margins improved 10% yoy to 55.3%.
That strong sales and financial performance drove a share appreciation of 283% over the past 52 weeks.
Covering LOVE for BTIG, analyst Camilo Lyon says, “LOVE is leveraging the current COVID-19 crisis and the work from home environment as consumers shift their purchases to home-related goods. The company has successfully shifted its resources to support online sales, even redeploying its full-time associates to interacting with customers online through instant messaging and product demos on social media.”
Lyon believes the company’s moves are successfully positioning it to thrive in a post-COVID world, modeling “27% annual revenue growth for the next two years as brand awareness grows, new customers come to the brand, and new product introductions give existing customers more reasons to shop the brand.”
To this end, Lyon puts a Buy rating on LOVE, while his $62 price target implies room for 26% upside growth in 2021. (To watch Lyon’s track record, click here)
Overall, there are 4 recent reviews on LOVE and all are Buys, making for a unanimous Strong Buy analyst consensus rating. LOVE’s share appreciation has pushed the stock price close to the $56.75 average target, leaving room for 16% upside from the $48.88 current trading price. (See LOVE stock analysis on TipRanks)
The ongoing corona crisis has done more than just push white-collar workers into remote office and telecommuting situations. By forcing large numbers of people to stay home, the pandemic – and the government response – has made potential home furnishings customers take a long look at their living quarters. Lovesac, above, is not the only company that has benefitted; Kirkland’s, a diversified home décor and furnishings retailer with over 380 stores in 35 states plus a vigorous online presence, is another.
Kirkland’s, like the other stocks on this list, has shown strong earnings growth and share appreciation in the past year. The company’s most recent quarterly results, for 3Q20, revealed top-line revenue of $146.6 million, just over the analyst forecast and up slightly year-over-year. Earnings showed a stronger gain. Q3 EPS was 66 cents per share, far better than the 53-cent loss recorded in 3Q19.
Share appreciation has paralleled these gains, to say the least. KIRK is up a whopping 1500% in the past 12 months, an enormous gain that reflects the company’s success in adapting to the increased importance of online sales.
The strong growth here has attracted notice from Craig-Hallum analyst Jeremy Hamblin.
“[Kirkland’s] continues to fire on all cylinders… While the company is likely benefitting from some industry tailwinds, it’s clear that strategic initiatives to improve margins have sustainability while investments in an improved E-commerce platform (up 50% in Q3) should help offset store closures… we … note that KIRK generally has a stronger balance sheet with a better FCF yield (mid-teens) than its peer group,” Hamblin wrote.
Accordingly, Hamblin rates KIRK stock a Buy and sets a $32 price target, implying a one-year upside of 65% from the share price of $19.38. (To watch Hamblin’s track record, click here)
Some stocks fly under the radar, and KIRK is one of those. Hamblin’s is the only recent analyst review of this company, and it is decidedly positive. (See KIRK stock analysis on TipRanks)
To find good ideas for growth 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.