Smart investors will always be on the lookout for shares of undervalued stocks. That, after all, is the essence behind the slogan “buy low, sell high”. The problem, however, is identifying which stocks are only temporarily in the doldrums and poised to pick up momentum again, rather than pointing out that their low prices simply aren't worth it.
Of course, there are many ways to assess this scenario, and one simple strategy is to examine the actions taken by insiders. These business leaders operate “on the inside” and have knowledge not available to the casual investor. Watching them buy stocks of the companies they work for, especially in bulk, sends the message that they may think the stocks are undervalued.
With that in mind, we opened up TipRanks' Insiders' Hot Stocks tool to find two stocks that fit a specific profile: stocks that have been in retreat this month but Insiders have been loading en masse — meaning you have poured millions into them lately. According to some Wall Street analysts, these names may even be on the verge of bouncing back.
EVgo, Inc. (EVGO)
We'll start in the EV sector, or specifically EV charging, with a look at a leader in this space. EVgo operates the largest public electric vehicle fast-charging network in the United States and has more than 850 fast-charging locations. These serve more than 60 metropolitan areas in 30 states and are all powered by 100% renewable energy.
The comprehensive charging infrastructure includes strategically placed fast and ultra-fast chargers in convenient locations such as shopping malls, grocery stores and public parking lots. Via the mobile app, drivers can easily locate and start charging sessions, monitor charging progress and even pay for the services. EVgo charging stations are compatible with different EV models, making them accessible to a wide range of EV owners.
With the increasing adoption of electric vehicles in the coming years, the company is poised to capitalize on this trend. But despite this upbeat outlook, the company's recent performance has been pretty abysmal, with a 38% decline in May.
This decline is mainly due to two factors. First, the company's first-quarter results fell short of expectations. Though revenue rose an impressive 228.6% year over year to $25.3 million, it fell $1.45 million short of consensus estimates. Additionally, the company's projected revenue for 2023, which ranges from $105 million to $150 million, fell short of analysts' expectations of $138.76 million. Second, the company compounded the situation by announcing a $125 million public offering of Class A common stock, sparking a subsequent sell-off.
EVgo's stock decline didn't seem to worry the company's CEO, David Nanus. In response to the drop, Nanus took action last week by buying 5,882,352 shares of EVGO, now valued at $21.76 million.
This appearance probably goes well with Evercore's James West. The analyst believes the company is well-positioned to ride the EV boom, writing: “As a pure-play provider of owner-managed public DCFC charging and charging as a service, EVGO is well positioned to capitalize on the rapid growth in public EV charging to profit.” its impact on the mega-topic of mobility electrification… The company uses proprietary algorithms that analyze census and other data sources to identify prime and practical charging station locations that meet the company's high return on investment hurdles.”
How does that translate to investors? West rates EVGO as Outperform (i.e. Buy), backed by a price target of $12. If that number is reached, investors can expect a whopping 224% return in a year. (To view West's track record, click here)
Now turning to the rest of the street where the stock gets an additional 3 each of “buy” and “hold” plus 1 “sell” for a consensus rating of “moderate buy”. Assuming the average price target of $8, the stock will post a gain of ~116% over the next 12 months. (See EVGO Stock Forecast)
Island Corporation (PODD)
Now let's move from electric vehicles to healthcare and focus on Insulet, a leading medical device manufacturer specializing in the design and manufacture of innovative insulin delivery systems.
The company's primary focus is its Omnipod insulin delivery system, which received FDA clearance in January 2005. More recently, in January 2022, the FDA gave the all-clear for the Omnipod 5, an automated insulin delivery system that works without the need to attach plastic tubing to the body and allows you to control it entirely from a smartphone app.
Launched in the US in August last year, the product helped the company beat guidance in its recently released Q1 statement. Revenue hit $358.1 million, up 21.2% year over year and beating consensus by $27.89 million. On the other hand, earnings per share came in at $0.23, well above the $0.10 analysts were expecting. And for the full year, the company raised its revenue growth expectations to 18% to 22% from a previous 14% to 19%.
Investors were pleased with the results and buoyed the shares after the report was released. However, the stock has since declined (down 14% overall in May), and recent news of competitor Medtronic's agreement to acquire EOFlow, a South Korean maker of wearable insulin patches, hasn't helped either.
In the meantime, a leader must be confident that the company is up to the challenge of its competitor. Director Michael Minogue recently raised 3,300 shares and spent over $1 million on the purchase.
The company also has the support of Canaccord analyst Kyle Rose, who writes, “There is MUCH to like here and we believe the fundamental thesis remains intact, bolstered by the momentum of O5, the longer-term prospects for T2-specific products and IP.” Initiatives. However, we expect the pressure on GMs to continue as O5 accounts for a larger share of sales (and has negative mix until it scales), PODD being sold at high component costs from built-up inventories and macro headwinds persists. We remain convinced that the combination of pharmacy channel, recurring revenue model, and T2 patient interest provides PODD with a “bedrock” for growth.”
“We believe that the launch of O5 will close any perceived competitive gap compared to existing AP/HCL pumps and will increase the competitive advantage of the pharmacy channel as well as the benefits of the risk-free pay-as-you-go model, which should be supportive.” sustained uptrend versus consensus growth expectations,” added the 5-star analyst.
These comments support Rose's “buy” rating, while its price target of $355 implies a 30% 12-month stock appreciation. (To view Rose's track record, click here)
So that's Canaccord's view: How does the rest of the street see Insulet going in the next 12 months? The analyst consensus rates the stock as a Moderate Buy based on 6 Buy and 4 Hold. At $352.9, the median target represents a potential upside of 29%. (See Insulet Stock Forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is for informational purposes only. It is very important to do your own analysis before investing.