Small-capitalization stocks have been hit particularly hard over the past months. A look at the Russell 2000, the leading index of small caps, tells the story. The Russell last hit a record high back in November of last year, and it’s gone mostly downhill from there — falling 20%.
But low prices now could translate into investor opportunities later on. In fact, Jefferies strategist Steven DeSanctis believes that the small caps are in a “bottoming out process.” DeSanctis argues that “valuations are getting a lot cheaper,” and that makes a circumstance in which investors could ‘buy the dip.’
With this in mind, we delved into the TipRanks database and homed in on two small cap names that have seen steep recent losses – but still carry Strong Buy ratings from the analyst community. Both are trading for under $10 a piece, providing a low entry point with the prospect of at least 100% growth ahead.
Vincerx, Inc. (VINC)
We’ll start with Vincerx, a biotech firm researching new therapies to address unmet needs in oncological treatments. The company has an active research pipeline, featuring both a small molecule drug program and a bioconjugation track.
The small molecule program features the company’s most advanced drug candidate, VIP152, which is undergoing a variety of trials as a treatment for lymphomas, leukemias, and various solid tumors. The drug candidate is a PTEFb/CDK9 inhibitor, and has recently – this past December – had several important milestones reported.
First, on December 7, the drug candidate was granted orphan drug designation by the FDA, for the treatment of diffuse large B-cell lymphoma. This brings up the second milestone announcement, from December 11; the company announced data from the Phase 1 clinical trial of VIP152 in the treatment of high-grade B-cell lymphoma (HGBL) and chronic lymphocytic leukemia (CLL). The data demonstrated clinically significant results, with a potent and durable therapeutic effect.
Finally, the third milestone was announced on December 17; the company has dosed the first patient in a Phase 1 dose escalation study of VIP152 in the treatment of both relapsed or refractory chronic lymphocytic leukemia and in Richter Syndrome. The company intends to dose a total of 20 patients in each track of the study.
These are the most advanced research programs in Vincerx’s pipeline. Other programs, on an additional five drug candidates, are at various levels of discovery and preclinical development.
Standing squarely in the bull camp, H.C. Wainwright analyst Michael King rates VINC a Buy, and his $25 price target implies a robust upside of 267% for the next 12 months. (To watch King’s track record, click here)
Backing his stance, the analyst wrote: “Vincerx is positioned at the right place at the right time with the right drug. Vincerx is in the propitious position of having a highly viable drug in a vibrant and growing hematologic malignancies market. This marketplace has evolved and grown rapidly in recent years… VIP152 can enter therapeutic ‘white space’ with a novel mechanism of action and an acceptable safety profile. Coupled with a large and growing patient population, we believe VIP152 is positioned for commercial success.”
Turning now to the rest of the Street, where there is no deviation here from a Strong Buy consensus rating based on a total of 5 Buy reviews. Neither is there much of a change on the projected gains front. The $25.33 average price target implies shares are set to rise 272% over the one-year timeframe. (See VINC stock forecast on TipRanks)
Now we’ll turn to a different facet of the healthcare sector. DocGo has recognized a weakness in the telehealth industry – the gap between remote connections and the need for periodic direct provider-patient contact. The company offers a ‘last mile’ mobile health service, bringing trained professionals to administer direct care – particularly diagnostics and medical transport – when and where it’s needed. The company describes itself as ‘bridging the gap’ between virtual and direct care.
Back in early November, the special purpose acquisition company (SPAC) Motion Acquisition Corporation announced that its shareholders had approved a business combination with DocGo. The merger was completed on November 5, and took DocGo onto the public markets; the DCGO ticker started trading on November 8. The merger brought $158 million in net cash proceeds to DocGo. Since the SPAC was completed, DCGO has fallen 36% in trading.
The fall in stock price came even as DocGo has reported solid revenue – in both results and forecasts. For 3Q21, the first quarter the company reported as a public entity, DocGo showed a top line of $85.8 million, up an impressive 219% from 3Q20. Looking ahead to Q4, the company has released preliminary figures showing quarterly revenue of $107.8 million, which mark a 246% yoy gain – and the seventh quarter in a row of record revenue.
The company has been moving recently to expand its footprint, and earlier in January it announced a multi-year contract with Aetna in New York and New Jersey to provide mobile at-home healthcare services to commercial and Medicare Advantage patients. The contract will make DocGo’s services available to up to another 2.5 million potential patients.
Also in January, DocGo announced that it had acquired three ambulance licenses and additional transport assets from Mid Atlantic Care. The acquisition expands DocGo’s business area into Maryland, Pennsylvania, and Delaware. The service expansion will include basic life support, advanced life support, and specialty care transport services.
5-star analyst Richard Close from Canaccord Genuity is impressed with DocGo, not least by its recent acquisition and expansionary moves.
“The Mid Atlantic acquisition along with the Aetna contract announced January 17, providing 2.5 million commercial and Medicare Advantage members with access to DocGo’s mobile at-home healthcare services, illustrates that the company has strong momentum in both its medical transportation and mobile health business units. Given DocGo’s favorable outlook and positive adj. EBITDA profile, we believe shares are attractive given the current market environment.”
Close’s comments support his Buy rating on the stock, and his $13 price target indicates potential for 100% upside in 2022. (To watch Close’s track record, click here)
Overall, it’s clear that Wall Street agrees with the Canaccord outlook; DocGo has picked up 4 analyst reviews since its SPAC completion, and they are unanimously positive, making for a Strong Buy consensus rating. The shares are selling for $6.48 and the $13.75 average price target implies a robust 112% upside going forward. (See DCGO stock forecast on TipRanks)
To find good ideas for small cap 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.