One big story keeps coming up in the stock market. It’s tax reform. Analysts are still sorting through the implications of the new rules but there is a general agreement that changes to the tax code are bullish for most companies.
This week, we searched for individual companies that analysts believe could be winners under tax reform. We searched our database for companies that are followed by at least four different Wall Street analysts and are priced below $20 a share.
Then, we looked for companies where at least one analyst raised their earnings per share (EPS) estimate by at least 5% for both the current year and next year. Finally, we restricted our search to companies without any downward revisions in EPS so that we captured a consensus in the upward expectations.
We found a diverse list of companies as potential investments.
Boot Barn Holdings, Inc. (NYSE: BOOT) is a lifestyle retail chain, that operates specialty retail stores in the United States. The company’s specialty retail stores offer western and work-related footwear, apparel, and accessories for men, ladies, and kids. It offers boots, shirts, jackets, hats, belts and belt buckles, western-style jewelry, rugged footwear, outerwear, overalls, denim, and flame-resistant and high-visibility clothing.
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Boot Barn operates approximately 223 stores in 31 states and also sells its products through e-commerce web sites, including bootbarn.com, sheplers.com, and countryoutfitter.com.
BOOT began trading in 2014 and its chart follows a typical pattern seen after a stock’s initial public offering or IPO.
There is often a move higher before a reversal and an extended period of consolidation. The current price action is bullish with a break to multiyear highs.
The Finish Line, Inc. (Nasdaq: FINL) operates as a retailer of athletic shoes, apparel, and accessories for men, women, and kids in the US. FINL operated more than 570 Finish Line stores in 44 states and operates e-commerce site, finishline.com and mobile commerce site, m.finishline.com.
FINL appears to be forming a bottom, a pattern seen in many stocks in the retail sector.
The stock is priced at less than 18 times next year’s estimated EPS of $0.77. Over the past seven years, stocks in the apparel retail sector have traded with an average P/E ratio of 20. This indicates FINL is undervalued relative to other companies in this sector.
Other fundamental ratios confirm that the stock is undervalued relative to its peers. It sells at a steep discount to its peers based on the price to sales (P/S) and price to book (P/B) ratios.
Vera Bradley, Inc. (Nasdaq: VRA) designs, manufactures, and sells women’s handbags, luggage and travel items, fashion and home accessories, and gifts. It also provides home products consisting of mugs and tumblers, as well as textiles products, such as throw blankets, beach towels, comforters, and wellness and beauty products; offers apparel/footwear, stationery, merchandising, and gift card products; and licenses its products.
The company sells directly to consumers through the company’s factory outlet stores in the United States, verabradley.com, and direct-to-consumer eBay sales, as well as through its annual outlet sale in Fort Wayne, Indiana. The company operates approximately 113 full-line stores and 46 factory outlets.
Vera Bradley also offers Vera Bradley branded products to approximately 2,600 specialty retail locations in the US, as well as department stores, national accounts, third party e-commerce sites and inventory liquidators, and its wholesale customer in Japan.
The stock has been in a persistent down trend since its 2010 IPO.
Analysts expect the company to report EPS that are consistently near $0.50 for each of the next few years. But, it also sells at a steep discount to its peers based on the P/S and P/B ratios.
Stocks in Other Sectors Also Made the Cut
AngioDynamics, Inc. (Nasdaq: ANGO) designs, manufactures, and sells various medical, surgical, and diagnostic devices for the treatment of peripheral vascular disease, vascular access, and for use in oncology and surgical settings in the United States and internationally.
It also offers AngioVac venous drainage system that includes venous drainage cannula for the removal of fresh, soft thrombi, or emboli during extracorporeal bypass; and cardiopulmonary bypass circuit for use in procedures during extracorporeal circulatory support.
Other products also have specialized uses. For interventional radiologists, cardiologists, vascular surgeons, urologists and surgical oncologists. Sales have been near $350 million a year every year since 2013. EPS of $0.71 are expected for the current fiscal year which ends in May.
Analysts expect EPS growth to average about 16.4% a year. That’s about double the historic growth rate for the medical equipment and supplies industry. Over the past seven years, that industry traded with an average price to earnings (P/E) ratio of 27.
At the industry average P/E ratio, ANGO would trade at about $19 a share, offering a double digit gain from the stock’s current price.
LATAM Airlines Group S.A. (NYSE: LTM) provides passenger and cargo air transportation services in South America, North/Central America, Europe, Africa, Asia, and Oceania. It provides domestic air service in Chile, Peru, Argentina, Colombia, Ecuador and Brazil
LATAM provides passenger transport services to approximately 150 destinations in 22 countries. The company also provides cargo services to approximately 169 destinations in 27 countries with a fleet of 310 aircraft.
The stock is in an uptrend.
EPS growth is expected to average more than 100% indicating LTM could be among the best stocks for investors looking to access the Latin American markets.
Gran Tierra Energy Inc. (NYSE: GTE) an independent energy company, engages in the acquisition, exploration, development, and production of oil and gas properties in Colombia, Peru, and Brazil. In a recent regulatory filing, the company reported total proved undeveloped reserves of 14.9 million barrels of oil equivalent (MMBOE), including 10.4 MMBOE in Colombia and 4.5 MMBOE in Brazil.
The stock provides a volatile stock market trading opportunity in the energy sector.
The company is expected to report EPS of $0.24 in 2018 based on the estimates of eight analysts who follow the company. If the company meets expectations, it is trading at less than twelve times estimated earnings. This is well below the industry average P/E ratio of 16 seen in the past seven years.
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