When stocks fall in price, it’s frequently a signal for renewed investor interest. After all, low share prices offer a chance to live up to the old market advice, ‘buy low and sell high.’ What investors need is some way to tell the underlying reasons for a drop in share price, whether it bodes well or ill for the stock.
One of the best stock signals comes from corporate insiders, the company officers who hold positions of high responsibility – to their Boards, and to their peers, and to their shareholders and customers – for bringing in the maximum returns. Their main focus is on keeping the company healthy, and their positions give them access to knowledge that the general public just hasn’t got. And that knowledge will inform their trading decisions when they trade their company’s stock.
Investors should keep on the lookout for informative trades by the insiders, both buys and sells, especially when the stock looks beaten down. Just because a company’s shares have slipped in price doesn’t necessarily mean that the stock is unsound, or should be avoided as an investment – and the insiders are in the best place to know that for certain. So, when retail investors see insiders buying large in a stock that’s trading at a low point, that’s a signal to heed.
We’ll heed that signal. Using the TipRanks Insiders’ Hot Stocks tool, we’ve looked up two stocks that show the combination of a beaten down price, a Strong Buy consensus rating from the analyst community, plenty of upside potential, and recent informative buys from the insiders. Here are the details.
We’ll start with a life sciences company, Azenta. This firm provides a necessary set of services and products for the biotech industry. These include a ‘full suite’ of solutions for cold-chain sample management, as well as genomic services, all used in vital research areas such as advanced cell therapies, clinical research, and drug development. Azenta operates as a global provider for top business customers in the academic, biotech, healthcare, and pharmaceutical sectors.
Until last fall, Azenta operated as a division of Brooks Automation; On December 1 of last year, the company completed its corporate name change and its launch as an independent entity. That move split the life sciences operations off of the parent company. Since the split, shares in AZTA have been falling consistently, and are down 45% so far this year.
Since spinning off, Azenta has seen revenues in the range between $132 million and $145 million in its first four financial releases as its own entity. The most recent quarterly release, for 3Q of fiscal year 2022 (ending on June 30), showed a top line of $132 million. This was down 9% from the previous quarter. This total included $47 million from Life Sciences Products and $85 million from Life Sciences Services.
In a note of interest to investors, Azenta has an active merger and acquisition strategy, to expand its operations, and this month announced its latest move. This is an agreement to acquire B Medical Systems, a leader in the global provision of temperature-controlled biological storage and transport solutions. The acquisition will cost Azenta approximately 410 million Euro, with an additional cash payment of 50 million Euro based on forward performance milestones. The transaction is expected to close later this year, in October.
Turning to the insider trades, we find two recent purchases from corporate officers. Last Friday, the company EVP and CFO Lindon Robertson purchased 4,350 shares, spending about $250,000. At the same time, Matthew McManus, EVP and COO of Azenta, spent over $501,000 to pick up 8,625 shares in the company.
The company has attracted positive attention from investment firm Stifel, as well, where 5-star analyst Patrick Ho writes: "We believe the structural foundation of the company’s strategy remains firmly in place, as we continue to support its dual approach to products and services. We believe this dual strategy provides both growth, as well as profitability over the long-term. The company also recently announced two acquisitions, Barkey Global Holdings and B Medical Systems (expected to close in October), which is part of its larger M&A strategy to grow and drive future revenue synergies.”
It should be unsurprising, then, that Ho rates AZTA an Outperform (i.e. Buy). Not to mention his $109 price target puts the upside potential at ~94%.(To watch Ho’s track record, click here)
In the past few weeks, this stock has picked up 5 analyst reviews – and these are all positive, for a unanimous Strong Buy consensus rating. Azenta shares are selling for $56.22 and the $79.20 average price target implies a one-year upside of ~41%. (See AZTA stock forecast on TipRanks)
For the second stock, we’ll take a look at a lifestyle company. Boot Barn is a retail chain offering Wester-styled apparel and footwear, along with work clothes and accessories. The company boast it is the largest retailer of Western wear in the US, and operates both online and out of 311 stores across 38 states. Of that total, 11 stores were opened in the most recent quarter, Q1 of fiscal year 2023, which ended this past June 25.
Dipping into the Q1 financial results, we find that Boot Barn brought in $365.9 million at the top line, up ~19% year-over-year. This result was supported by strong increases in same-store sales, which were up 10% overall y/y. That number includes a 10.1% increase in brick-and-mortar same-store sales, and a 9.3% increase in e-commerce. Boot Barn’s net income was down from the year-ago quarter; falling slightly from $40.6 million to $39.3 million. On a per-share basis, diluted EPS fell y/y from $1.35 per share to $1.29.
Boot Barn’s forward guidance is pointing toward full-year revenue of $1.68 billion to $1.70 billion, which was considered somewhat disappointing; consensus had been looking for $1.73 billion. We should note here that shares in BOOT are down ~42% this year.
On the insider front, there have been three ‘informative buys’ from company officers this month. The most recent, and largest purchase, was by Peter Starrett, of the Board of Directors. Starrett bought 4,000 shares for $283,480. Another Board member, Chris Bruzzo, bought 1,532 shares for $100,515. And the third informative buy was from CFO James Watkins, whose purchase of 2,500 shares cost him $152,075.
Craig-Hallum analyst Jeremy Hamblin appears to echo the insiders' sentiment. The analyst puts a Buy rating on BOOT shares and his $120 price target suggests a one-year gain of ~67%. (To watch Hamblin’s track record, click here)
Hamblin describes the fiscal Q1 results as ‘exceptional,’ and goes on to say, “Exclusive brands continue to gain share and provide a vehicle for GM expansion with newer exclusive brands tracking well. While BOOT lowered full-year guidance, we believe investors saw potential for a bigger EPS cut and the resiliency of operating margins should bolster confidence that downside is limited."
"BOOT stock is trading at a 50% discount to its historical P/E multiple and at a more than 40% discount to its peers despite better sales growth and margins. We view BOOT as an outstanding risk/reward at current levels with limited downside and the potential to double in the next year,” the analyst summed up.
Overall, no fewer than 9 of the Street’s stock pros have chimed in on BOOT recently; 8 have rated the stock a Buy against a single Hold – for a Strong Buy consensus rating. The average price target of $101.11 implies ~41% increase from the current trading price of $71.89. (See BOOT stock forecast 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.
