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3 “Strong Buy” Stocks Trading at Rock-Bottom Prices
Whether markets move up or down, every investor loves a bargain. There’s a thrill in finding a valuable stock at low, low price – and then watching it appreciate in the mid- to long-term. Portfolio growth of that sort is one of the reasons we’re all in the investing game to begin with.So, how are investors supposed to distinguish between the names poised to get back on their feet and those set to remain down in the dumps? That’s what the pros on Wall Street are here for.Using TipRanks’ database, we pinpointed three beaten-down stocks the analysts believe are gearing up for a rebound. Despite the hefty losses incurred so far in 2020, the three tickers have scored enough praise from the Street to earn a “Strong Buy” consensus rating. Scorpio Tanker (STNG)We’ll start in the ocean-going tanker sector, a major component of the global trade network, transporting the fuel that propels the world’s economy. The industry faces systemic headwinds in the form of unavoidable high costs and low margins, and has been buffeted by low demand and short storage space during the coronavirus crisis.The general difficulties facing the tanker segment have pushed Scorpio’s stock price down 72% this year. Scorpio is a small-cap fuel carrier, operating a fleet of 128 owned tankers supplemented by another 10 chartered vessels. The company’s ships include 21 Handymax and 59 MR tankers, along with numerous LR1 and LR2 vessels. Scorpio’s fleet operates world-wide.While the tanker industry has felt heavy headwinds recently, Scorpio has managed to weather them. The company has a build-in advantage of operating the smallest sized tankers (Handymax) in the global fleet, allowing it access to smaller ports and facilities than competitors dependent on larger vessels. STNG’s 1H20 performance has outperformed its industry, and shown sequential gains in both Q1 and Q2 for revenues and earnings. The second quarter top line came in at $346 million, with $2.40 EPS.Covering this stock for Deutsche Bank, analyst Amit Mehrotra writes, “STNG’s financial position should be fine given new liquidity- with $82M expected in the coming weeks/months, mostly from sale and leaseback transactions… having cash to burn is an important consideration when assessing risk, and in this case STNG remains comfortably positioned in our view. From a stock standpoint, while we understand the lackluster performance of shares in the context of current rates and relative risk profile… we see more than enough liquidity levers outside of new equity…”In-line with his view of STNG’s liquidity position, Mehrotra rates the stock a Buy. His $27 price target implies a robust upside of 153% for the coming year. (To watch Mehrotra’s track record, click here)Overall, the Strong Buy analyst consensus rating here is unanimous, based on 4 recent Buy reviews. Scorpio Tanker is currently trading at $10.69, and its $28.75 average price target suggests a one-year upside of 168%. (See STNG stock analysis on TipRanks)International Seaways (INSW)Next on our list is another small-cap tanker firm, International Seaways. This company operates a fleet of 39 vessels, ranging from Suezmax and Panamax ships – the largest that can transit their eponymous canals – to the giant VLCC tankers weighing up to 250,000 tons. The company’s fleet also includes the smaller MR and LR1 tankers.INSW has been able to leverage its varied fleet to generate positive revenues and earnings, even in the difficult environment imposed by the coronavirus pandemic. The top line in the past two quarters rose from $125 million to $139 million, and EPS grew from $1.49 to $2.39.Despite the generally positive revenues and earnings, however, INSW shares have lost value. The stock peaked for the year in early January, but has since fallen by 48%. Liam Burke, of B. Riley FBR, notes that INSW has seen a 100% year-over-year gain in time charter equivalent revenue, a positive marker that comes as the company has been able to take advantage of the need for floating oil storage. “The company saw continued strength in 2Q20 following a strong 1Q20 on demand for both crude and refined petroleum product floating storage. For the first half of 2020, strong spot rate drove healthy generation net cash from operating activities of $127.7 million, compared to $43.8 million a year ago. In a very volatile spot market, we believe the combination of INSW's opportunistically time chartering vessels and operating a diversified fleet enables the company to capture value in both crude oil and refined products,” Burke opined.Burke sets a $35 price target on International Seaways’ shares, indicating a potential for impressive growth – up to 131% in the next year. This outlook supports his Buy rating. (To watch Burke’s track record, click here)Overall, INSW has 4 recent reviews, including 3 Buys and 1 Hold, making its analyst consensus view a Strong Buy. The $30.25 average price target suggests the stock has a 99% upside potential from its share price of $15.15. (See INSW stock analysis on TipRanks)FirstCash, Inc. (FCFS)The last stock on our list inhabits a unique business niche, in the world of pawn shops. FirstCash operates a chain of pawn shops in the US and Latin America, with a presence in 24 US states as well as Mexico, Guatemala, El Salvador, and Colombia. The company provides financing services to customers with severe cash and credit constraints, using pledges of personal property to secure consumer pawn loans.The general decline in consumer activity – and the concerted government push to provide extended unemployment assistance and special ‘one-time’ stimulus benefits – put a damper on FirstCash’s business in 1H20. The effect was particularly noticeable coming off a high 4Q19. FCFS typically sees more business traffic in the fourth quarter, which encompasses the holiday season. The contrast between a strong Q4 and the difficult ‘corona half’ was marked.In 1H20, FirstCash saw revenues fall to $466 million in Q1 and $412 million Q2. The EPS drop was steeper; earnings slipped 35% from 96 cents in Q1 to 62 cents in Q2. The company’s shares have been falling off, as well. The market swoon of late February inaugurated a period of high volatility for FCFS, which has left the stock down 26% year-to-date.Alonso Garcia, of Credit Suisse, describes the current valuation as “attractive,” however, and adds, “The defensive nature of FCFS’ business model should play out in the quarters to come and deliver a gradual but consistent earnings rebound starting in 4Q20, as consumption patterns should tend to normalize as economies re-open and as demand for pawns pick up once the effect of the strong fiscal stimulus in the US is left behind and the effects of the deteriorated macro backdrop post-pandemic kick in.”Garcia gives FCFS an Outperform (i.e. Buy) rating, along with a $74 price target, implying a 25% upside potential. (To watch Garcia’s track record, click here)All in all, FirstCash has a Strong Buy analyst consensus rating based on 3 Buys and 1 Hold. The shares of this company are selling for $59.11, and the average price target of $79.38 indicates room for 34% upside growth in the next 12 months. (See FCFS stock analysis 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.
The Link LonkOctober 13, 2020 at 09:47PM
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