As November finishes with a strong performance relative to the previous quarter, multiple market watchers continue to predict an impending bull-run market through the end of the year and early into 2024. Investors who have kept their powder dry may be on the lookout for hidden gems: robust companies whose shares are still undervalued.
These 5 stocks are our top Pro Picks for this month, taken from S&P 500-listed companies that have garnered high InvestingPro health ratings (benchmarked against more than 100 financial factors and indicators from companies in the same sector), as well as from among those trading well under our proprietary fair value estimates (based on 5 overlaid investing models) and analyst assessments.
All of these names have earned InvestingPro health scores of well above 2.75, which for the last 7 years has indicated outperformance vs. the S&P 500. A score this high points to first-rate financials: excellent earnings, cash flow, and growth vs. peers in its sector.
| Top December Stock | InvestingPro Health Score |
|---|---|
| Semler Scientific (SMLR) | 3.99 / 5 |
| RCI Hospitality Holdings (RICK) | 3.08 / 5 |
| Academy Sports Outdoors (ASO) | 3.06 / 5 |
| Chesapeake Energy Corp (CHK) | 3.22 / 5 |
| Harmony Biosciences (HRMY) | 3.98 / 5 |
Importantly, all of these stocks are also currently undervalued per InvestingPro’s fair value calculations and favored by Wall Street analysts polled by InvestingPro. So if you’re eager to bulk up your portfolio, these overlooked powerhouse plays are all worth serious consideration.
Semler Scientific (SMLR):
- InvestingPro health score: 3.99 / 5.00
- InvestingPro average fair value: $52.68 / 35.7% upside
- Fair value confidence: Medium
- Industry: Healthcare Equipment and Supplies
Semler Scientific (SMLR) has shown impressive financial performance in the last quarter, with a consistent increase in market capitalization. As of November 28th, 2023, the company’s market capitalization stands at $258.05 million.
In the recent earnings call for Q3 2023, the company reported robust financial results, with total revenue reaching $16.3 million, reflecting a notable 16% increase from the previous year. This growth was primarily driven by the sales of its QuantaFlo product for testing peripheral arterial disease (PAD). Notably, the pretax net income surged to $7 million, marking a substantial 52% increase from the previous year, underscoring the company’s strong financial performance.
This company’s solid financial position is shown also in its cash, cash equivalents, and short-term investments amounting to $56 million as of September 30, 2023; Semler Scientific is well-positioned for future growth and innovation. The company’s debt-to-equity ratio has been declining, which is a positive indicator of its financial health. The company’s P/E ratio has also shown a favorable trend, decreasing from 55.9x in FY2018 to 17.9x in FY2022, reflecting a potential undervaluation of the stock.
With a fair value upside of 35.7% and a current stock price of $38.82 as of November 28th, Semler Scientific presents an intriguing investment opportunity. Moreover, recent news highlights the company’s strong financial performance, with better-than-expected earnings and revenue, positioning it as a compelling stock pick for this month.
RCI Hospitality Holdings (RICK):
- InvestingPro health score: 3.08 / 5.00
- InvestingPro fair value: $77.71 / 36.0% upside
- Fair value confidence: Medium
- Industry: Consumer Discretionary / Hotels, Restaurants & Leisure
RCI Hospitality Holdings (RICK) is an intriguing stock pick for this month. As of the most recent finalized quarter (end of June), RICK had a Market Cap of approximately $721.53 million and a Fair Value Upside of 34.9%. This has since increased further to a 36% upside.
RCI Hospitality Holdings has shown a fluctuating trend in its P/E ratio over the past few years. The P/E ratio was 13.0x in FY2018, increased slightly to 13.1x in FY2019, experienced a significant decline to -108.5x in FY2020, then rebounded to 24.4x in FY2021, and settled at 16.0x in FY2022. This fluctuation in the P/E ratio reflects potential volatility in the company’s earnings and stock valuation, which may not be cause for alarm, but showcases the importance of other robust metrics.
In terms of revenue forecast, RICK’s forecast suggests a mix of growth and stability in the company’s top-line performance over the coming years. When compared to other companies in our screener data, RCI Hospitality Holdings’ P/E ratio appears to be relatively lower than some of the larger companies, indicating potential undervaluation.
Additionally, recent news from October 26, 2023, revealed that RCI Hospitality Holdings has modified $15.7 million in debt to free up more cash for share buybacks, demonstrating a strategic focus on enhancing shareholder value. Furthermore, an analyst from H.C. Wainwright has maintained a ‘buy’ rating on RCI Hospitality, with a price target of $115.00, which represents a substantial upside potential in excess of the more conservative 36% shown by our data, albeit with a medium degree of certainty. These factors collectively position RCI Hospitality Holdings as an intriguing stock pick, supported by its financial metrics and analyst ratings.
Academy Sports Outdoors (ASO):
- InvestingPro health score: 3.06 / 5.00
- InvestingPro fair value: $67.23 / 37.6% upside
- Fair value confidence: High
- Industry: Consumer Discretionary / Specialty Retail
Academy Sports and Outdoors (ASO) is our third top stock pick for December 2023, backed by its robust financial performance and strategic outlook. With a market capitalization of $3.64 billion, ASO has demonstrated resilience and potential for capital appreciation.
The company’s August earnings report exceeded expectations, with an EPS of $2.09, surpassing the projected $2.02, and revenue matching estimates at $1.58 billion. Notably, ASO raised its full-year EPS outlook, projecting a range of $6.95 to $7.65, slightly higher than consensus estimates. Despite a -7.5% decline in comparable sales, which outperformed the estimated decline of -8.6%, ASO remains optimistic about its fiscal year revenue projections of $6.175 billion to $6.365 billion. This positive outlook reflects the company’s resilience and ability to navigate market challenges.
ASO’s financial metrics indicate a balanced position, with a P/E ratio of 29.3x and a manageable debt level of $36.88 billion in relation to its market capitalization. Furthermore, InvestingPro’s fair value calculations suggest an estimated 37.6% potential fair value upside for ASO, indicating an undervalued status with moderate volatility risk. This combination of factors positions ASO as an appealing option for investors seeking both stability and growth potential in their portfolio.
Chesapeake Energy Corp (CHK):
- InvestingPro health score: 3.22 / 5.00
- InvestingPro fair value: $114 / 40.8% upside
- Fair value confidence: Medium
- Industry: Energy / Oil, Gas & Consumable Fuels
Chesapeake Energy Corp (CHK) presents an intriguing opportunity for investors seeking exposure to the energy sector. With a market capitalization of $10.69 billion, CHK has shown resilience and potential for growth despite recent market fluctuations.
The company’s return on invested capital saw a remarkable increase from 0.1% in FY2019 to 29.8% in FY2022, reflecting improved operational efficiency and profitability. And CHK’s return on common equity has demonstrated a positive trajectory, reaching 65.8% in FY2022, indicating strong shareholder value creation.
In terms of valuation, CHK’s P/E ratio has shown a steady improvement, standing at 4.5x in FY2022, signaling an attractive valuation relative to its earnings. Additionally, the company’s debt-to-equity ratio has significantly improved from 1834.2% in FY2018 to 35.2% in FY2022, reflecting a healthier balance sheet and reduced financial risk. Despite recent market fluctuations, CHK’s fair value of $114 represents a compelling opportunity for investors seeking solid capital appreciation.
The company’s recent performance in the Marcellus and Haynesville basins, along with its strategic agreements for LNG supply, position CHK for potential growth and value creation. In summary, Chesapeake Energy Corp presents an intriguing opportunity for investors, with a strong financial position, attractive valuation, and potential for capital appreciation driven by its operational performance and strategic initiatives.
Harmony Biosciences (HRMY):
- InvestingPro health score: 3.98 / 5.00
- InvestingPro fair value: $39.12 / 34.5% upside
- Fair value confidence: Medium
- Industry: Healthcare / Pharmaceuticals
Harmony Biosciences Holdings, Inc. (HRMY) is a biopharmaceutical company with a market capitalization of approximately $1.69 billion as of November 29, 2023.
The company’s focus on innovative treatments for neurological disorders has garnered attention, especially with its flagship narcolepsy drug, WAKIX. Despite recent challenges, HRMY’s financial health overall score of 3.98 reflects a solid position. The company’s fair value is estimated at $39.12, indicating a potential upside of 34.5%. However, while HRMY’s stock price has faced a decline, with a 1-year total return of -49.9%, this presents a rare opportunity to purchase the stock while undervalued. The P/E ratio stands at 21.0x, and the company reported a revenue of $437.86 million in FY2022, with a revenue forecast of $581.29 million for FY2023.
The company’s total debt and total current assets are reported at $194.24 million and $400.29 million, respectively. Harmony Biosciences reported strong second-quarter financial results, with net revenue for its narcolepsy drug, WAKIX, reaching $134.2 million, a 25% increase compared to the same quarter last year. The company remains confident in the growth potential of WAKIX, estimating it to be a $1 billion-plus opportunity.
Analysts have provided a consensus recommendation of 1.88 for HRMY, indicating a mixed outlook. Despite challenges, HRMY’s recent financial performance and strategic initiatives position it as a potential growth opportunity in the biopharmaceutical industry.
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Previous Investing Stock Picks for US Markets
If you’re looking for more great opportunities, here is a list of our top stock picks for previous months.
Remember 📌
The health scores and these stocks’ place on our opportunities list were correct at the time of original posting month. It’s important for investors to check any updated information, which can be done at the click of a button through InvestingPro.
