There’s been a number of stocks that have stumbled over the past year. Yet, despite their struggles, there are attractive components to some of these names.
Put simply, these are comeback stocks. Two of my favorites were BlackBerry Ltd (NASDAQ:BBRY) and Chipotle Mexican Grill, Inc. (NYSE:CMG). After sizable rallies this year, however, I am no longer holding either one.
Instead, we’re looking for new stocks that can post a big comeback after a troublesome year. We’re not just looking for stocks that have had big declines either. Instead, we’re looking for ones that are set to grow earnings this year and next year, too.
It’s true, there’s more to assessing a stock than by just looking at its earnings. But it’s a good place to start when looking for rebounders. Sometimes it’s a high-quality company that pays a healthy dividend and just hit a few bumps in the road. Other times we have a company that was poorly run, but a few notable changes make for big-time potential.
Some of these stocks can be risky — they’re certainly not like the best dividend stocks we’ve evaluated. But some are relatively well known. Let’s see what we found.
Comeback Stocks to Buy: Bristol-Myers Squibb (BMY)
Long-Term Earnings Growth: 9.2%
YTD Performance: -7.3%
Shares of Bristol-Myers Squibb Co (NYSE:BMY) are hurting. BMY Stock is down 8% on the year and 24% over the past 12 months. Aside from the poor performance, shares have been wildly volatile this year as well.
On the plus side though, BMY has a solid business and great brands. Two of Bristol-Myers’ big drugs are both doing well. Last quarter, sales for Opdivo climbed 60%, while sales of Eliquis improved 50% year-over-year. It’s not just these two, though. Last quarter, overall sales climbed 12.3% while net income soared by 31.7%. In fact, in the past 12 quarters, BMY hasn’t missed revenue estimates once. On the earnings front, it’s beaten analysts’ estimates 11 out of 12 times. This includes last quarter, which topped EPS estimates by 15%.
Will the good times last? Supposedly so. Analysts expect sales to grow 4.3% this year and 2.8% next year. While that’s not great, BMY has shown a history of topping those expectations. Mid-single-digit growth would be more attractive and is possible. On the earnings front, again, we’re not blown away. But it’s positive growth nonetheless. Analysts expect 4.2% EPS growth in 2017 and 6.4% next year. On the positive side, they also expect 9.2% annual earnings growth for the next five years.
Trading at 17 times forward earnings may be a little rich for this type of growth. But with a 2.9% dividend yield, BMY does become more attractive.
There’s one last kicker: M&A. There’s been speculation that BMY could be a takeover target. Of course, not many could afford such a giant — currently sporting an $88.5 billion market cap. But there’s a few out there that could, like Gilead Sciences, Inc. (NASDAQ:GILD) or Pfizer Inc. (NYSE:PFE).
Comeback Stocks to Buy: CVS (CVS)
Earnings Growth: 7.8%
Like Bristol-Myers, CVS Health Corp (NYSE:CVS) is another name most investors are familiar with. Unfortunately, though, its stock price has not been so glamorous (CVS stock has tumbled almost 25% over the past year). However, a comeback could be on the horizon.
CVS is not expected to boast substantial earnings growth, with sub-1% estimates for 2017. Next year though, analysts expect 8.5% growth and 7.8% EPS growth annually for the next five years.
Here’s the kicker, though. CVS has a dirt-cheap valuation, trading at just 12 times forward earnings. So while investors may have to slog through a boring 2017 with flat growth, the future years could be bright. Consider this as well: The market usually assesses stocks with a focus on the future, not the past. Meaning that the market may warm up to CVS before the turn actually starts taking place. In other words, later this year is when CVS may start seeing some traction in its stock price.
Until then, investors will be paid a 2.6% dividend yield to wait. The chart isn’t overwhelming bullish. That’s true, but there is a layer of support near $76. Investors willing to take a low-risk, high-reward play could use it to their advantage.
By buying near current levels, they could use a stop-loss nearby, allowing for only small losses should CVS fall. However, if it rebounds, there could be solid gains on the way. Keep in mind, this stock was north of $100 just 12 months ago.
Comeback Stocks to Buy: Gulfport Energy (GPOR)
Earnings Growth: 40%
Unlike the first two, Gulfport Energy Corporation (NASDAQ:GPOR) may not be a name everyone is familiar with. The natural gas exploration and production company hasn’t been exempt from the beatdown in energy. GPOR stock is down 26% this year and a whopping 47% in the past 12 months.
Let’s get right into it: Revenues slumped some 46% in 2016, but net income actually rose. Albeit, the company still lost $980 million last year, but it was better than the $1.22 billion it lost the year before. In all, earnings per share came in at negative $4.06. Okay, now the beatdown makes sense. But is there opportunity?
GPOR has strung together five straight earnings beats, missing revenue estimates only once in that stretch. Additionally, analysts expect sales to climb 70% this year and 29.5% next year. Expectations call for 38% earnings growth this year to $1.23 per share and 13% growth in 2018. Unfortunately, investors won’t enjoy a dividend yield and debt is relatively high at $1.6 billion. This is in no way a risk-free trade, but upside does exist. Should they take a shot on GPOR, investors are paying just 11.5 times forward earnings for this comeback stock.
Should energy prices rise, GPOR could be set to fly. And not only that, but should energy prices simply not crater, GPOR should be just fine.
Comeback Stocks to Buy: Hain (HAIN)
Earnings Growth: 10.3%
Once a favorite among health and wellness investors, Hain Celestial Group Inc (NASDAQ:HAIN) has been caked in controversy. After rebounding from a sizable decline in 2015, shares plunged in 2016 over an accounting issue. The stock is down 24% over the past year. But for observational investors, there could be an opportunity at hand.
Let’s back up for a second. Last year, Hain said its financial statements may be inaccurate. Specifically, there were possible issues relating to Hain’s recognition of revenue. A few months ago though, investors seemingly had the all-clear from Hain after saying it found no issues. So why is it still hovering near 52-week lows? Because the company hasn’t updated its financial statements with the SEC. That’s fishy and it’s exactly why the stock remains under pressure.
So why recommend Hain as a comeback stock? Simple, the company recently said it will post its results for the past three quarters by the end of May. That’s why for the observational investor, they could wait to see the results and react accordingly. If there really is no wrongdoing, then HAIN stock should be set to rally. If there is though, there will be pain.
Investors need to be careful with the stock for that reason. But also, be aware of its potential. Hain could have plenty of room to rally should good news come its way. Keep in mind, if the stock rallied 100%, it would “only” get back to its former high.
For those that just have to be involved beforehand, maybe some call options would be appropriate.
Comeback Stocks to Buy: Hanesbrands (HBI)
Earnings Growth: 10.3%
Another similar-sounding stock caught our eye in this search as well: Hanesbrands Inc. (NYSE:HBI). This has been a hard one to watch, as the apparel maker has fallen 24% over the past year. Apparel companies and retailers have given us plenty of reasons not to trust them. But if you’re looking to fill the void in your portfolio with a flyer, this could be the one.
The negatives are obvious: Retail has become a tough environment and that trickles right down to apparel makers. That’s basically it. But as investors price in more and more negativity, at some point, the positives start to shine. Let’s start with the dividend, of which HBI yields an impressive 2.95%. In February, the company boosted its payout 36% from 11 cents per share to 15 cents. Nothing crazy, but a 36% increase is certainly nothing to scoff at. With a payout ratio of less than 35%, HBI could raise its dividend for years without growing its cash flow or earnings (which it is).
Then there’s the valuation. Trading at just 9.5 times forward earnings is dirt cheap. Analysts expect 7% earnings growth this year and 8.1% next year. For sales, they expect 6.9% growth in 2017 and 1.7% growth in 2018. Earnings have been hit and miss with HBI, but last quarter was promising as management held steady on its previous guidance. While analysts’ earnings estimates are about in line with management, they are still lower on sales. That sets up HBI to surprise to the upside later this year.
In that event, shares could very well begin to rally. Additionally, management has put into motion cost-cutting efforts and ways to boost cash flow. That may not help sales, but it improves the business and makes the stock more attractive.
Comeback Stocks to Buy: Tractor Supply (TSCO)
Earnings Growth: 13.5%
Retail has been a dumpster fire this year. But a few companies — like Home Depot Inc (NYSE:HD) and Lowe’s Companies, Inc. (NYSE:LOW) — have stood out. I should know, I feel like I’m there every weekend now. And while these two have had nice rallies, the same can’t be said for Tractor Supply Company (NASDAQ:TSCO). Shares are down 23% this year and a whopping 36% over the past 12 months. In fact, shares hit a new 52-week low in Thursday’s session. What gives?
Put simply, expectations were too high and the company didn’t deliver. After a few quarters of in-line results, TSCO flat-out missed on first-quarter EPS and revenue expectations. That’s not encouraging, but there are a number of positives. First, TSCO yields nearly 2%, which is benefiting from the 12.5% raise management gave the dividend this quarter.
Additionally, the stock has a reasonable valuation of just 15 times forward earnings. What does that get investors? TSCO is set to grow sales 6.8% this year and 7.5% in 2018. For earnings, analysts expect just 4.3% growth this year, but 12% next year.
There’s room for error at TSCO, but not much. The midpoint from management’s original revenue and EPS guidance is still above consensus estimates. So long as TSCO hits its own targets, it will beat Wall Street’s estimates. That’s good news. So is its sub-30% payout ratio, meaning it can afford to raise the dividend even more in the future.
If TSCO can string together a few good quarters, it could be a comeback stock in 2017. Considering the strength in home improvement and outdoor sales, along with the spring cleanup season, TSCO is in prime position.
Comeback Stocks to Buy: LiLAC Group (LILAK)
Earnings Growth: 67.5%
Liberty Global plc (NASDAQ:LILAK, NASDAQ:LILA) subgroup LiLAC Group (NASDAQ:LILAK) has been hammered, down 52% over the past 12 months. LiLAC is a broadband, mobile and internet company that operates primarily in Latin America and the Caribbean islands.
Why’s this baby a comeback candidate? Sales are expected to grow 35% this year to $3.68 billion from $2.72 billion last year. In 2018, sales growth will understandably slow, but still improve to $3.8 billion. Analysts expect earnings to grow to 77 cents per share in 2017, up massively from the $2.13 loss in 2016. In 2018, expectations call for 37.7% earnings growth to $1.06 per share. From there, analysts expect five-year annual earnings growth of 67%. An added bonus? It trades below book value, too.
Despite this monster growth, shares trade at just 19 times forward earnings. Why so low? Honestly, I just don’t think that many people are in tune with LiLAC. Many have never heard of it and it shows big losses for the prior year. Aside from being a relatively unknown entity with a weird name, LiLAC is a tough one to understand.
Parent-company Liberty Global, Inc. (NASDAQ:LBTYA) has a number of subgroups and different share classes on top of that. The lack of clarity makes it tough to own when there are so many not-too-hard to understand companies out there.
In the end, though, the light will hopefully shine through on LiLAC’s positives. It’s got sales growth, earnings growth and high quality assets. If investors focus on that — and eventually, they will — this stock’s got plenty of upside.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell held no positions in any security mentioned.