There are two contradictory trends in the markets today – the macro bearish trend which has seen the S&P fall 19% so far this year, and has seen the tech-heavy NASDAQ get stuck in a real bear market, with a decrease of 30% year over year. -date loss – and periodic rallies that have superimposed local gains on this bottom.
Seeking winners in this type of environment, investment firm Raymond James decided to give two stocks a high rating. These are stocks that have outperformed so far this year, posting overall gains even in a bear market environment, and the company’s analysts give them strong buy ratings.
Scrolling through the tickers in the TipRanks database, it’s clear that Raymond James isn’t the only one who thinks these stocks have a lot to offer investors; both are also ranked as Strong Buys by analyst consensus. Let’s take a closer look.
Incredible Pharmaceuticals (MIRM)
We will start with Mirum Pharmaceuticals, a clinical and commercial-stage biopharmaceutical company dedicated to the treatment of rare liver diseases. These are conditions that typically have small patient bases and high unmet medical needs that cause significant negative effects on patients’ quality of life. Mirum is working on a series of new drugs to treat a variety of conditions, including progressive familial intrahepatic cholestasis (PFIC) to intrahepatic cholestasis of pregnancy (ICP).
Commercially, in September last year, the company received FDA approval for its first drug, maralixibat, now branded as Livmarli, for the treatment of Alagille Syndrome (ALGS) for children aged one year and over. The drug has also been submitted for approval in Europe.
Having a drug approved and on the market is the “holy grail” for research-driven biopharmacies, and Mirum has taken that approval to a 41% price gain in 2022. Additionally, the company has begun to see its revenue increase this year, with first quarter revenue reaching $12.9 million and second quarter revenue, the last reported, reaching $17.5 million.
Also in the second quarter of this year, Mirum changed its relationship with Satiogen Pharmaceuticals. Mirum had previously had a licensing relationship and had paid royalties to Satiogen; it has now acquired Satiogen as a wholly owned subsidiary and reduced its royalties and milestone obligations.
In October this year, Mirum released several updates on Livmarli and its progress in testing the new drug as a treatment for other liver conditions. These other clinical trials aim to expand the patient base of the approved drug, in order to generate revenue. In particular, the company released phase 3 data from the MARCH study, showing efficacy in the treatment of PFICs. The drug passed the primary endpoint and the company plans to make further submissions to regulatory agencies for label expansion.
Mirum has four additional clinical trials underway for Livmarli in the treatment of biliary atresia, and three for another drug candidate, volixibat. Volixibat studies are at the Phase 2b stage, testing the drug in the treatment of primary sclerosing cholangitis, intrahepatic cholestasis of pregnancy, and primary biliary cholangitis. The results of these studies should start rolling in next year.
In covering this stock for Raymond James, analyst Steven Seedhouse sees recent Phase 3 data on Livmarli/maralixibat as the key point. He writes, “We expect a potential label at least as broad as that of ODX given that the group treated with all PFICs in MARS 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 penetration in PFICs given 1) the reasonable conclusion that higher dosage drives MRX efficacy across a wide range of subtypes of PFIC (compared to no pruritus dose response and a maximum dose of 120 μg/kg for ODX), and 2) more child-friendly administration of liquid versus powder sprinkled on food for ODX. »
“The relatively muted market reaction to the positive MARS reading and the undervaluation of MIRM’s PFIC program in general provides a good entry opportunity,” the analyst summed up.
To that end, Seedhouse rates MIRM as a Strong Buy, and its price target of $88 implies an impressive upside potential of 290% year over year. (To see Seedhouse’s track record, Click here)
Wall Street has to agree with the bullish view here, as all five recent analyst reviews are positive, for a unanimous consensus rating of strong buy on stocks. Mirum is trading at $22.55 per share, and its average price target of $57.25 suggests an upside of around 154% over the one-year horizon. (See MIRM stock forecast on TipRanks)
Encompass Health Corporation (EHC)
Next up is Encompass Heath, a company with a significant niche in the US healthcare system. Encompass is the largest owner and operator of inpatient rehabilitation hospitals in the nation, with 153 facilities in 36 states plus Puerto Rico. Encompass provides compassionate, high-quality patient care during recovery from serious injuries, illnesses, or surgeries, and boasts that patient outcomes generally exceed national standards.
Healthcare is big business, worth more than $800 billion in the United States alone last year, and Encompass owns a significant portion of that business. The $5.43 billion company controls 24% of licensed inpatient rehabilitation beds available in hospitals and serves 31% of Medicare patients. Overall, Encompass sees approximately 203,600 annual hospital discharges.
The company released its 3Q22 financial results on Oct. 26 and posted $1.09 billion in revenue. That figure was down from $1.33 billion in Q2, but up 7.8% from the $1.01 billion reported in 3Q21. From that, the company earned net income of $45.5 million for the quarter, or 45 cents per share. Net and comprehensive income, at 67 cents per share, beat forecast 64 cents, although it was down 35% year-over-year.
Overall, Encompass shares have outperformed broader markets this year, up 6%.
5-star analyst John Ransom covers this stock for Raymond James, and he sees a clear path for the company.
“While we are disappointed that higher revenue has not translated into higher EBITDA, de novo delays are a transient issue and contract labor metrics are improving. to strong volume trends and a strong Medicare rate update, bodes well for 2023 results. We believe EHC is one of the biggest winners in our “peak work” thesis “, and we’re now modeling $920 million of 2023 adj. EBITDA (up $20 million), implying only 3% organic growth over Q4’s annualized run rate after adjusting for 20 million in de novo costs, and a $21 million improvement in contract labor over the Q4 run rate.At 8x 2024 EBITDA, EHC emerges as one of the purchases most attractive in our coverage universe,” Ransom said.
Based on the above, Ransom rates EHC as a Strong Buy with a price target of $72, indicating confidence in a 32% one-year gain for the stock. (To see Ransom’s track record, Click here)
A solidly performing healthcare company is sure to grab street attention – and Encompass has 10 recent analyst reviews, all positive, backing its consensus Strong Buy rating. With shares trading at $54.44 and an average price target of $64.10, the company’s stock has around 18% year-over-year upside potential. And as a bonus, the stock also pays a dividend which yields 1.1%. (See EHC stock forecast on TipRanks)
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Disclaimer: 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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