There are two conflicting developments within the markets at this time – the bearish macro pattern that has seen the S&P fall 19% to date this yr, and has seen the tech-heavy NASDAQ get caught in a real bear market, with a 30% year-to-date loss – and periodic rallies which have overlaid native beneficial properties on that background.
Looking for winners in this type of surroundings, funding agency Raymond James has come spherical to charge two shares extremely. These are equities which have overperformed to date this yr, posting general beneficial properties even within the bearish market surroundings, and the agency’s analysts give them Strong Buy scores.
Running the tickers by the TipRanks database, it’s clear Raymond James just isn’t alone in considering these shares have a lot to supply traders; each are additionally rated as Strong Buys by the analyst consensus. Let’s take a more in-depth look.
Mirum Pharmaceuticals (MIRM)
We’ll begin with Mirum Pharmaceuticals, a scientific and business stage biopharma firm devoted to the therapy of uncommon ailments of the liver. These are situations that sometimes have small affected person bases and excessive unmet medical wants that trigger robust detrimental results on sufferers’ high quality of life. Mirum is engaged on a sequence of novel medicines to deal with quite a lot of situations, together with progressive familial intrahepatic cholestasis (PFIC) to intrahepatic cholestasis of being pregnant (ICP).
On the business facet, in September of final yr the corporate obtained FDA approval for its first medicine, maralixibat, now branded as Livmarli, within the therapy of Alagille syndrome (ALGS) for kids ages one and up. The medicine has additionally been submitted for approval in Europe.
Having a drug accredited and in the marketplace is the ‘holy grail’ for research-oriented biopharmas, and Mirum has ridden that approval to a 41% share worth acquire in 2022. In addition, the corporate has began to see rising revenues this yr, with Q1’s high line hitting $12.9 million and Q2’s, the final reported, reaching $17.5 million.
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Also within the second quarter of this yr, Mirum modified its relationship with Satiogen Pharmaceuticals. Mirum had previously had a licensing relationship, and paid royalties to Satiogen; it has now acquired Satiogen outright as a wholly-owned subsidiary, and lowered its royalty and milestone obligations.
In October of this yr, Mirum launched a number of updates on Livmarli, and its progress in testing the brand new drug as a therapy for extra liver situations. These additional scientific trials purpose to develop the affected person base of the accredited medicine, to drive revenues. In specific, the corporate launched Phase 3 knowledge from the MARCH research, exhibiting efficacy within the therapy of PFIC. The drug met the first endpoint, and the corporate plans to make additional submissions to regulatory businesses for label growth.
Mirum has 4 extra scientific trials ongoing for Livmarli within the therapy of Biliary Atresia, and three for one more drug candidate, volixibat. The volixibat research are on the Phase 2b stage, and are testing the drug within the therapy of Primary Sclerosing Cholangitis, Intrahepatic Cholestasis of Pregnancy, and Primary Biliary Cholangitis. Results from these research are anticipated to start out rolling in subsequent yr.
In overlaying this inventory for Raymond James, analyst Steven Seedhouse sees the latest Phase 3 knowledge on Livmarli/maralixibat as the important thing level. He writes, “We expect a potential label at least as broad as ODX’s given the all-PFIC treated group in MARCH had numerically higher pruritus/sBA responses than ODX in PEDFIC 1. MRX, in our view, has the potential to eventually meet or even exceed ODX’s penetration in PFIC given 1) the reasonable conclusion that higher dosing is the driver of MRX’s efficacy across a broad range of PFIC subtypes (vs. the lack of pruritus dose response and max dosing at 120μg/ kg for ODX), and 2) more kid-friendly administration of liquid vs. powder sprinkled on food for ODX.”
“The market’s relatively muted reaction to the positive MARCH readout and undervaluation of MIRM’s PFIC program in general provides a good entry opportunity,” the analyst summed up.
To this end, Seedhouse rates MIRM a Strong Buy, and his $88 price target implies an impressive one-year upside potential of 290%. (To watch Seedhouse’s track record, click here)
Wall Street must agree with the bullish view here, as all five of the recent analyst reviews are positive, for a unanimous Strong Buy consensus rating on the shares. Mirum is trading for $22.55 per share, and its $57.25 average price target suggests ~154% upside on the one-year horizon. (See MIRM stock forecast on TipRanks)
Encompass Health Corporation (EHC)
Next up is Encompass Heath, a company with an important niche in the US healthcare system. Encompass is the country’s largest owner and operator of inpatient rehabilitation hospitals, with 153 facilities in 36 states plus Puerto Rico. Encompass provides compassionate, high-quality care for patients during recovery from major injuries, illnesses, or surgeries, and boasts that patient outcomes typically beat the national standards.
Health care is big business, worth over $800 billion in the US alone last year, and Encompass holds a significant piece of that business. The $5.43 billion company controls 24% of the licensed inpatient rehab beds available in hospitals, and serves 31% of Medicare patients. Overall, Encompass sees approximately 203,600 annual inpatient discharges.
The company released its 3Q22 financial results on October 26, and showed $1.09 billion at the top line. This was down from $1.33 billion in Q2, but was up 7.8% from the $1.01 billion reported in 3Q21. From this, the company derived a net income of $45.5 million for the quarter, or 45 cents per share. The net and comprehensive income, at 67 cents per share, beat the 64-cent forecast although it was down 35% year-over-year.
Overall, Encompass shares have outperformed the broader markets this year, rising 6%.
5-star analyst John Ransom covers this stock for Raymond James, and he sees a clear path forward for the company.
“While we are disappointed that revenue upside did not translate EBITDA upside, the de novo delays are a transitory issue and contract labor metrics are improving. That paired with strong volume trends and a solid Medicare rate update bodes well for 2023 results. We believe EHC is one of the biggest winners from our ‘peak labor’ thesis, and we are now modeling $920M of 2023 adj. EBITDA (up $20M), which implies only 3% organic growth off the annualized 4Q run rate after adjusting for $20M of de novo costs, and a $21M improvement in contract labor off the 4Q run rate. At 8x 2024 EBITDA, EHC screens as one of the most attractive buys in our coverage universe,” Ransom opined.
Based on the above, Ransom charges EHC a Strong Buy together with a $72 worth goal, indicating his confidence in a one-year acquire of 32% for the inventory. (To watch Ransom’s observe report, click on right here)
A solidly performing healthcare firm is bound to get consideration from the Street – and Encompass has 10 latest analyst critiques, all optimistic, supporting its Strong Buy consensus score. With the shares buying and selling at $54.44 and the typical worth goal coming in at $64.10, the corporate’s inventory has a one-year upside potential of ~18%. And as a small bonus, the inventory additionally pays a dividend that yields 1.1%. (See EHC inventory forecast on TipRanks)
To discover good concepts for shares buying and selling at enticing valuations, go to TipRanks’ Best Stocks to Buy, a newly launched device that unites all of TipRanks’ fairness insights.
Disclaimer: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is essential to do your personal evaluation earlier than making any funding.