The Bottom Is in for These 2 Stocks? Analysts Say ‘Buy’
The savvy investor knows that the best time to buy is when a stock is low - it's just the old buy low and sell high game, age-old advice on making money. But the markets have been rising lately, even considering the recent fluctuations. But with the S&P and NASDAQ at or near record levels, it's hard to tell when a stock is going to be low.
The key is just to take them as individuals. The stock exchange is the world's largest real-time experiment for averaging over large mass numbers. The markets as a whole can rise while some individual stocks slide down. And when a stock hits bottom, it becomes a buying opportunity as long as its fundamentals are solid.
Wall Street analysts are making a name for themselves by finding these opportunities and bringing them to our attention. Prices fall for reasons, but not all of those reasons are bad for the stock. We used the TipRanks database and checked out the analyst commentary on two cheap stocks that got attention for all the right reasons.
Heritage Insurance Holdings (HRTG)
We're starting with Heritage Insurance Holdings, a Florida-based property and casualty insurer. Heritage provides actuarial services, adjustments, claims handling, distribution and underwriting in the residential, single-family, condominium and rental markets.
So far, 2020 has been a difficult year for Heritage with mixed earnings and losses. On the negative side of the ledger, the company saw a significant increase in weather losses in the third quarter with such payouts up to $ 47.3 million from $ 18.7 million in the year-ago quarter. On the positive side, the company expanded its homeowner insurance to Delaware and expanded it to 15 active states. The company reported a 17% increase in gross written premiums to $ 278.2 million.
Despite the spike in gross written premiums - a trend that continued throughout the year - stock performance this year has been very volatile. Shares are down 25% since the start of the year.
Analyst Matthew Carletti reports that this year the company has partnered with several national names (GEICO, Liberty Mutual, and others) to expand beyond its Florida base.
On balance, Carletti writes: “We find that Heritage's operational leverage for the business is currently quite low (around 1: 1), which means that insurance companies have significant scope to grow without that additional Capital generation is required. While we consider the potential for the acquisition of an ongoing entire company to be unlikely, we wouldn't be surprised if an opportunistic deal with renewal rights or similar structure were to take place, given that many of Heritage's colleagues in Florida are against deteriorating results, regulatory capital shortages and limited issues fighting prospects for new capital. "
These comments support Carletti's target price of $ 16 and its outperform (i.e. buy) rating. At current prices, his target implies an upward movement of 66% for the coming year. (To see Carletti's track record, click here.)
Overall, Heritage stock retains a strong buy rating from the analyst consensus based on unanimous 3 most recent buy ratings. The stock is selling for $ 9.65 and has an average price target of $ 15, which puts the one-year upside potential at 55%. (See HRTG stock analysis on TipRanks)
LexinFintech Holdings (LX)
From insurance, we are moving to online consumer finance, a niche that is hugely attractive to China's rapidly growing - and increasingly affluent - middle class. However, this population group cannot always access traditional sources of capital in the Chinese banking system. LexinFintech, a holding company with subsidiaries that offer asset management, cash loans and installment payments as an online service, closes the gap.
LexinFintech reported some strong metrics in the third quarter. Lending accruals rose 30% for the quarter, while orders through the company's platform rose 49% year over year to 84.4 million. The user statistics were particularly strong: the number of active platform users with a loan rose 21% year over year to 7.4 million, and the total number of registered users reached 106 million, an impressive 69% increase. On the financial side, revenue increased ~ 6% year over year to RMB 3.15 billion (USD 480 million in US currency). However, gross profit and net income were both in decline. Profits were down 42% year over year and earnings were down 52% compared to the third quarter of 2019. These were the metrics that investors took away. LX stocks are down 55% since the start of the year.
In a note on LX for Credit Suisse, analyst Yiran Zhong notes the negative and positive results for the third quarter: "The decrease in net income in QoQ was mainly due to sequentially higher provisions for credit losses that reflect the quality impact of COVID-19 Older assets and more volatile risk reflect performance for clients won in 2H19. "From there, Zhong also points to the company's optimistic stance on forward performance:" Lexin reiterated its volume forecast for the full year of Rmb 170 to 180 billion due to the good momentum in consumption-oriented customer acquisitions. It is also rapidly shifting towards a loan-sharing facilitation model, which hit 50% of total volume in October. "
According to Zhong, the positive outweigh the negative. The analyst concluded, "Lexin remains well-positioned to benefit from the post-pandemic household consumption rebound supported by its new consumer platform strategy."
To do this, Zhong rates LX at outperformance (i.e. buy) along with a price target of $ 9.70. This number indicates an upward trend of 54% over the next 12 months. (To see Zhong's track record, click here.)
With 3 recent buy reviews, the analyst consensus rating for LX is a unanimous strong buy. The stock sells for $ 6.33 and has an average price target of $ 10.49, which implies a year-long move up of 66.5%. (See LX stock analysis on TipRanks)
To find great ideas for trading stocks at attractive valuations, visit TipRanks 'Best Stocks to Buy, a newly launched tool that brings together all of the insights into TipRanks' stocks.
Disclaimer: The opinions expressed in this article are solely those of the presented analysts. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.
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