When stocks fall in price, it is often a signal of renewed investment interest. After all, low stock prices offer an opportunity 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 share price decline, whether it bodes well or ill for the stock.
One of the best stock signs comes from corporate insiders, the company executives who hold positions of high responsibility – on their boards, and to their peers, and to their shareholders and customers – to achieve maximum returns. Their primary focus is keeping the company healthy, and their positions give them access to knowledge that the general public simply doesn’t have. And this knowledge will inform their trading decisions when trading their company’s stock.
Investors should watch out for insider trading, both buying and selling, especially when the stock looks damaged. Just because a company’s shares have fallen in price doesn’t necessarily mean the stock is unhealthy or should be avoided as an investment – and insiders are in the best position to know for sure. So when retail investors see individuals buying large shares in a stock that is trading at a low point, that’s a sign to watch out for.
We will take this signal into account. Using the TipRanks Insiders Hot Stocks tool, we looked for two stocks that show the combination of a depressed price, a strong buy consensus from the analyst community, plenty of upside, and recent informative buys from the experts. Here are the details.
We’ll start with a life sciences company, Azenta. This company provides an essential set of services and products for the biotechnology industry. These include a “full suite” of cold chain sample management solutions, as well as genomic services, used in vital research areas such as advanced cell therapies, clinical research and drug development. Azenta serves as a global provider for leading business customers in the academic, biotech, healthcare and pharmaceutical sectors.
Until last fall, Azenta operated as a division of Brooks Automation. On December 1 last year, the company completed its corporate name change and launched as an independent entity. This move separated the life sciences operations from the parent company. Since the split, AZTA shares have fallen steadily and are down 45% so far this year.
Since going public, Azenta has generated between $132 million and $145 million in revenue in its first four financial releases as its own entity. The most recent quarterly release, for the 3rd quarter of fiscal 2022 (ended June 30), showed a top line of $132 million. This was down 9% from the previous quarter. That total included $47 million from Life Sciences Products and $85 million from Life Sciences Services.
On a note of interest to investors, Azenta has an active M&A strategy to expand its business, and this month announced its latest move. This is an agreement to acquire B Medical Systems, a global leader in temperature-controlled biological storage and transport solutions. The acquisition will cost Azenta approximately €410 million, with an additional cash payment of €50 million based on future performance milestones. The transaction is expected to close later this year in October.
In terms of insider trading, we find two recent purchases by business executives. Last Friday, company EVP and CFO Lindon Robertson bought 4,350 shares, spending about $250,000. At the same time, Matthew McManus, EVP and COO of Azenta, spent more than $501,000 to get 8,625 shares of the company.
The company has also attracted positive attention from investment firm Stifel, where 5-star analyst Patrick Ho writes: “We believe the structural foundations of the company’s strategy remain solid as we continue to support its dual approach to products and services. We believe this dual strategy provides both growth and 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 a larger M&A strategy to develop and drive future revenue synergies.”
It should come as no surprise, then, that Ho rates AZTA an Outperform (ie, Buy). Not to mention the $109 price target, the upside potential is ~94%. (To track Ho’s history, Click here)
Over the past few weeks, this stock has garnered 5 analyst reviews – and all of them are positive, for a unanimous strong buy consensus. Azenta shares are selling for $56.22 and the average target price of $79.20 implies a one-year upside of ~41%. (See AZTA stock prediction on TipRanks)
Boot Barn Holdings (BOOT)
For the second stock, we’ll take a look at a lifestyle company. Boot Barn is a retail chain offering Wester-style clothing and footwear, along with workwear and accessories. The company prides itself on being the largest retailer of western clothing in the US and operates both online and in 311 stores in 38 states. Of that total, 11 stores opened in the most recent quarter, the 1st quarter of fiscal 2023, which ended June 25.
Diving into Q1 financial results, we find that Boot Barn brought in $365.9 million on the top line, up ~19% year-over-year. This result was supported by strong increases in same-store sales, which were up 10% year-on-year overall. 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 previous quarter. falling slightly from $40.6 million to $39.3 million. On a per share basis, diluted EPS decreased year over year from $1.35 per share to $1.29.
Boot Barn’s forward guidance refers to full-year revenue of $1.68 billion to $1.70 billion, which was seen as somewhat disappointing. The consensus was seeking $1.73 billion. We should note here that BOOT shares are down ~42% this year.
On the insider front, there have been three “informative purchases” by company executives this month. The most recent and largest purchase was made by Peter Starrett, of the Board. Starrett bought 4,000 shares worth $283,480. Another board member Chris Bruzzo bought 1,532 shares for $100,515. And the third informative purchase was from CFO James Watkins, whose purchase of 2,500 shares cost him $152,075.
Craig-Hallum analyst Jeremy Hamblin seems to echo the insiders’ sentiment. The analyst puts a Buy rating on BOOT shares and a $120 price target suggests a one-year gain of ~67%. (To watch Hamblin’s record, Click here)
Hamblin describes the fiscal first quarter results as “excellent” and goes on to say, “Exclusive brands continue to gain share and provide a vehicle for GM’s expansion with newer exclusive brands tracking well. While BOOT lowered guidance for the full year, we believe investors saw potential for a larger EPS cut and the resilience of operating margins should bolster confidence that the downside is limited.”
“BOOT stock trades at a 50% discount to its historical P/E multiple and more than 40% discount to its peers, despite better sales growth and margins. We view BOOT as an excellent risk/reward at current levels with limited decline and the potential to double next year,” the analyst summarized.
In total, no less than 9 of the Street’s equity professionals have appeared on BOOT recently. 8 have rated the stock a Buy versus a single Hold – for a consensus rating of Strong Buy. The average price target of $101.11 implies a ~41% upside from the current trading price of $71.89. (See BOOT Stock Prediction on TipRanks)
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Denial of responsibility: The views 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.