Markets are ravaged by volatility, with unpredictable fluctuations that make recent sessions feel like a rollercoaster. Major indices fell sharply at the end of last week, but Friday's release of economic data showing strong manufacturing activity provided a boost that reduced market losses somewhat. The recent earnings season also gave cause for optimism – the S&P listed companies collectively reported 46% year-over-year profit increases in the first quarter, compared to the expected 20%.
Goldman Sachs strategist David Kostin sees the generally positive macro data supporting stocks in an uncertain market environment.
“The combination of global reopening, higher consumer savings and strong corporate operating leverage will lead to a significant recovery in both economic and earnings growth … US stocks will continue to rise, albeit at a slower pace than over the past 12 months … stocks will remain attractive compared to cash and bonds, ”noted Kostin.
Taking this into consideration, our attention turned to three stocks that Goldman Sachs believes will exceed growth prospects, with the company's analysts predicting upward potential of more than 100% each. By running the tickers through the Investing Insights platform, we found that all three score a "Perfect 10" smart score.
The platform gives each stock a one-digit score, based on the sum of 6 separate factors. The factors used are known to correlate with future overperformance; when they line up, this is a strong indicator for buyers to be aware of. Let's take a closer look.
Rain Therapeutics ( RAIN )
We start a new public biopharmaceutical company Rain Therapeutics Inc (NASDAQ :). The company is developing a tumor agnostic treatment strategy that selects patients based on the underlying genetics rather than the histology of the disease. Rain has two drug candidates in the pipeline, RAIN-32, which is undergoing several clinical trials, and RAD52, which is still in a preclinical trial.
A closer look at the pipeline reveals that RAIN-32, an MDM2 inhibitor called milademetan, has planned a phase 3 study for WD / DD liposarcoma for the second half of this year. At the same time, a phase 2 study, an MDM2 basket study, is also planned for 2H21. In addition to the WD / DD Phase 3 and Phase 2 Basket studies, the company is also considering initiating a new Phase 2 study in intimal sarcoma in early 2022.
RAD52, the company's second pipeline candidate, is a novel approach to the treatment of breast, prostate, pancreatic and ovarian cancer. The drug is still in the early stages of research, but selection of lead clinical trial candidates will begin sometime next year.
As mentioned above, Rain is a new public company; it went public in April this year. The company listed 7,352,941 shares in the US public markets for $ 17 each. The IPO raised approximately $ 125 million in gross proceeds.
Analyst Graig Suvannavejh opens coverage of this stock to Goldman Sachs, writing, “While we are optimistic about RAIN-32's prospects in LPS, revenue opportunities appear modest as we forecast peak risk unadj./adj. $ 612mn / $ 428mn (assuming 70% POS), given only c.3K annual incidence in the US That said, our enthusiasm for RAIN also rests on RAIN-32's potential outside of LPS, including in intimal sarcoma ( an ultra orphan cancer), and also on MDM2-enhanced solid tumors, which we see as a substantial market opportunity. Over these three, we project $ 2.2 billion / $ 859 million in peak year risk unadj./adj sales in the US / EU5, with other future indications for RAIN-32 (trials begin in 2022) and also a preclinical RAD52 program (a synthetic lethality game) that represents upside potential for our predictions. "
In line with his optimistic stance, Suvannavejh assesses RAIN a Buy, and his $ 56 price target implies room for an astonishing 252% upside potential in the next 12 months.
As we turn to the rest of the street, other analysts echo Suvannavejh's sentiment. Since only Buy recommendations have been published in the past three months, RAIN deserves a Strong Buy analyst consensus. With the average price target of $ 33.75, the stock could rise 112% from its current level. (See RAIN stock analysis)
Relmada Therapeutics ( RLMD )
The next stock on Goldman Sachs' radar, Relmada Therapeutics Inc (NASDAQ :), is a clinical stage pharmaceutical company focused on central nervous system issues. REL-1017, the company's lead pipeline candidate, is a new NMDA receptor channel blocker under development as a treatment for major depressive disorders. Mental health is an important part of the pharmaceutical industry, and the antidepressant portion of the mental health chart is projected to exceed $ 18.5 billion by 2027.
Relmada initiated RELIANCE I, the first pivotal study of REL-1017, in December last year, testing the drug as an add-on treatment for major depression. Last April, two additional studies, RELIANCE II and RELIANCE-OPS, were underway. All three are now underway and a fourth, phase 1, study of REL-1017 as monotherapy will begin in the first half of this year. Key data from the two pivotal studies are scheduled for publication in 1H22.
Goldman Sachs analyst Andrea Tan takes a look at this stock, giving it a Buy rating along with a price target of $ 78, implying a 103% rise over the next 12 months.
"We note a series of important events in 2021+ that could drive value shift: (1) investigating the potential of human abuse (HAP) against positive control oxycodone in 2Q21 and ketamine in 2H21, wherever we see the market as high risk of negative outcome (see scenario analysis inside); (2) topline data for monotherapy REL-1017 in 4Q21; and (3) topline pivotal data in supplemental MDD (GSe peak sales of $ 2.5 billion in 2033) in 1H22 with NDA filing follows next, which we are all constructive about given the differentiated profile showing rapid onset of action, enhanced efficacy and well-tolerated so far, ”said Tan.
What does the rest of the street have to say? 3 purchases and no held or sold items add up to a strong buy consensus rating. Given the median price target of $ 67.67, stocks could rise 76% in the coming year. (See RLMD Stock Analysis)
Agiliti ( AGTI )
We close our look at high potential Goldman picks with Agiliti Inc (NYSE :). The company is a medical equipment supplier, offering hospitals and health systems a range of bariatrics, beds, therapy mattresses, fall prevention devices, ventilators, breast pumps, patient monitors, medical grade reclining chairs and surgical equipment – along with technical support, clinical engineering and on- site management to correctly use, maintain and adapt the numerous devices. According to the figures, Agiliti has more than 90 service centers in the lower 48 states, supporting more than 800,000 medical equipment in more than 7,000 acute care hospitals and alternative medical locations.
On April 23 of this year, Agility debuted its shares on the NYSE in an IPO that initially cost $ 14. The company launched more than 26.3 million shares and raised approximately $ 431.5 million in gross proceeds on the first day of its IPO.
Last week, Agiliti released its first quarterly financial report as a publicly traded company. Revenue of $ 235 million was 31% higher than the first quarter of a year ago. Net income was $ 9.6 million, a strong $ 22.2 million more than the net loss in the first quarter of last year, and earnings per share were 9 cents per share.
Looking at the company's forward path, Goldman Sachs analyst Amit Hazan noted, “While this was not reflected in the balance sheet at the end of the first quarter, management provided insight into the leverage effect after the IPO of approximately 3.3x on a pro forma basis. While somewhat limited from a management perspective given Northfield's requirements, management expects both the financial and management flexibility to pursue opportunistic mergers and acquisitions later this year. "
Hazan summarized: "We consider AGTI's end-to-end service model to be differentiated and ideally suited to today's hospital working environment; we see the current valuation as an attractive entry point …"
To this end, Hazan gives AGTI stock a Buy rating, and his $ 43 price target implies a 151% rise for the coming year.
In its first few weeks in the public markets, AGTI shares have garnered 9 reviews, including 8 Buys and only 1 Hold. The stock is selling for $ 17.12 and the average price target of $ 21.39 suggests there is room for ~ 25% upside potential for a year. (See AGTI Stock Analysis)
For more ideas for stocks trading at attractive valuations, visit Investing Insights .
