Pro Picks: 4 Founder-Led Diamonds

Scouring for your next great investing idea? Look into companies still being steered by their founders. Names like these often do extraordinarily well thanks to their leaders’ passion, ability to cut through internal bureaucracy, and clarity of vision. Jeff Bezos' Amazon (NASDAQ:AMZN), of course, is a well-known example. In fact, one study by Bain & Company found considerable outperformance by S&P 500-listed companies in which the founder remains deeply involved: An index of such stocks did 3.1 times better than the market between 1999 and 2014.

But manually putting together a comprehensive list like this, let alone nailing down the ones that you might actually want to buy, can be an arduous task. That’s why InvestingPro has compiled those companies into an effortlessly accessible index - and this week’s VIP Pro Picks separates out 4 of the most compelling ideas, chosen for their lofty share-price targets among Wall Street analysts. And a highlight is the very undervalued Jazz Pharmaceuticals (NASDAQ:JAZZ).

If you’re an InvestingPro subscriber, you can generate reams of new investing ideas by clicking into the Ideas tab on your desktop view. Get an instant look at the publicly traded holdings of a vast directory of portfolios - as well as collections of stocks with investment themes such as founder-led companies.

And once you’ve clicked into that portfolio, you can tease out the best investment ideas for your financial goals by narrowing stocks down further: “Fastest Growing,” for instance - or, in our case, “Bullish Analyst Targets.”

Source: InvestingPro

Jazz Pharma has one of the highest price targets of the lot vs. current share levels, while also sporting a trove of other impressive metrics that make it deserving of a closer look.

The company is led by Chairperson and CEO Bruce Cozadd, who started Jazz two decades ago along with a couple of former colleagues. Their stated mission with Jazz was to create a corporate culture characterized by integrity, collaboration, passion, pursuit of excellence, and innovation - and treating their employees well looks to have paid off handsomely.

Source: InvestingPro

The company - whose leading drugs treat cancer, seizures, and sleeping disorders like narcolepsy - has a “Great Performance” InvestingPro financial health rating of 4 out of 5, supported by outstanding profit margins as well as strong revenue and EPS trends that outpace the vast majority of peers. Cash flow is solid, as well, with 67.2x capital expenditures coverage and a 168% ratio of cash flow to current liabilities, as InvestingPro metrics relay:

Source: InvestingPro

Goldman Sachs is among the many research firms that call Jazz Pharma a buy - along with a $212 price target, a massive leap from its current price around $120. And when Goldman upgraded the stock this past December, its analysts cited Jazz’s “positive outlook on operating margin performance and the potential for multiple upside levers,” among them expansion of two of its drugs into non-U.S. markets.

After a 22% pullback from the start of the year, Jazz shares are currently trading at a heavy discount of a 6.1x forward price-to-earnings ratio. Fair value calculations from InvestingPro estimate 35% upside from current levels, while analysts polled by InvestingPro collectively expect the stock to rocket a whopping 64% from here, with zero underperform ratings among them.

Want to see the full list of this week’s founder-led Pro Picks? Start here to unlock must-have insights and data. And while you’re here, dig into InvestingPro’s wealth of tools and screeners to begin building a lucrative portfolio.

If you're already an InvestingPro subscriber, this week's full Pro Picks list is available here.

Data as of July 6, 2023.