top-analyst-sees-compelling-value-in-these-2-stocks

Top Analyst Sees Compelling Value in These 2 Stocks

As we head into the tail end of the year, markets are giving conflicting signals. The steady upward movement, that we saw in all of the main indexes through much of the year, has given way to short-term slips and increased volatility. Inflation is up, the job market remains stuck in an ugly combination of stubborn unemployment and record-high levels of job openings, all while Congress and the Biden Administration are looking less and less capable of passing a set of aggressive spending plans.

Markets are getting buffeted about by winds from all directions, making a confusing vista for investors. Finding expert advice would go along way toward clearing the air.

We’ve taken a step to get that process started, and used the TipRanks database to find a couple of stocks recommended by 5-star analyst Amit Dayal of H.C. Wainwright. Dayal is rated number 38 overall, out of more than 7,600 Wall Street analysts. The 60% average return his recommendations have generated in the past year sets him apart from his peers. We’ll look at two stocks which he rates as Buys – and see why Dayal believes they’ll surge in the next few months.

Flux Power Holdings (FLUX)

The first stock we’ll look out, Flux Power, aims to transform the way light industry moves products – in warehouses, airports, stockrooms, and more – through the introduction of lithium ion battery packs. The company’s main product, power packs for light industrial lift trucks, pallet jacks, and other product transfer and ground support equipment, offer advantages in performance, charge durations, and cost over traditional lead-acid batteries, and even over propane-fueled engines. Flux bills its lithium ion “LiFT Pack” products, which include a proprietary battery management system, as a cleaner, more environmentally friendly solution for light industry’s needs.

This small-cap company recently reported financial results for its completed fiscal year 2021. Flux showed a 56% gain in total annual revenue, to $26.3 million. In addition, the company opened the fiscal year by uplisting its stock to the NASDAQ index. The Flux ticker started on the NASDAQ back in August of 2020, and since then has fallen from the $20 peak the stock reached in mid-January.

While the share price is down, Flux has still proceeded with several moves to expand the business. The company partnered with Beam Global, a provider of electric vehicle charging stations, to provide battery packs for the stations. And as of the July 20 this year, Flux reported that it had a record-level work backlog of $13.7 million. Also in July, Flux reached the milestone level of 10,000 battery packs operating in the field.

In his coverage of Flux, Dayal sees the flexible nature of the company’s prime products as a distinct advantage, one that opens up new pathways for profitability.

“Flux’s LiFT Packs are modular and scalable in design, positioning it to extend its reach beyond material handling into new verticals… We believe the company’s growth runway should remain extended as the addressable market opportunity continues to expand. The company has plans to increase its assembly lines from three currently to six, which should support expansion in material handling and other new verticals,” Dayal opined.

The analyst added, “We believe the competitive advantages offered by lithium-ion technology such as long battery life, faster charging times, higher energy efficiency, and lower total cost of ownership, make the commercial proposition attractive to potential customers and should allow Flux to take market share from legacy lead-acid batteries and propane-based solutions.”

In line with these bullish comments, Dayal initiated coverage on FLUX with a Buy rating and a $15 price target. Investors could be pocketing gains of 186%, should Dayal’s thesis play out as expected. (To watch Dayal’s track record, click here)

Are other analysts in agreement? They are. Only Buy ratings, 3, in fact, have been issued in the last three months, so the consensus rating is a Strong Buy. Given the $13.67 average price target, shares could skyrocket ~161% in the next year. (See FLUX stock analysis on TipRanks)

Calumet Specialty Products (CLMT)

Next up is Calumet, an industrial company in the specialty products realm. Calumet produces a wide range of chemical products, including paraffin waxes, aliphatic solvents, and naphthenic and paraffinic oils. Earlier this year, the company launched a project to produce renewable diesel fuel at its Montana facility. Overall, Calumet offers a lineup of more than 3,400 different products, marketed to more than 2,700 customers in 90 countries around the world, and produced at 12 manufacturing facilities in North America.

Calumet in early August released its 2Q21 numbers, and the results caused some disappointment. Even though the top line revenue recorded its second sequential gain in a row, and reaching $807 million showed the best print since 3Q19, the EPS came in at a net loss of 97 cents. This was a far deeper loss than the 5 cents expected.

Even though the company was losing in Q2, it has not stopped its expansion plans. In addition to the renewable diesel project in Montana – which shows promise to open a new and reliable niche for Calumet, and whose plant went online on schedule on August 19 – Calumet is also expanding its specialty wax and packaging branch in Muncie, Indiana. The expansion involves a $2.7 million investment by the company.

Amit Dayal sees the renewable diesel initiative as the key point for Calumet. He describes it as a sign that the company is in transition, shifting to a new key product that will better fit today’s business climate.

“The company is in the process of executing a significant shift in its business mix with the addition of renewable diesel (RD), positioning the company as a unique energy transition play… Cash flows from the RD business could be directed towards lowering the somewhat over-leveraged balance sheet with $1.3B in debt. We believe the RD business, assuming current prices and planned capacity, could provide an additional $335M in annual adjusted EBITDA at 13,900 bpd feedrate, and proportionally higher at the targeted 18,000 bpd feedrate.”

To this end, Dayal puts a Buy rating on CLMT shares, along with a $19 price target that indicates confidence in ~98% one-year growth for the stock. (To watch Dayal’s track record, click here)

Looking at the consensus breakdown, 2 Buys and 1 Hold add up to a Moderate Buy analyst consensus. At $11.33, the average price target implies nearly 18% upside potential. (See CLMT stock analysis 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.