The benchmark equity indices are currently hovering near their all-time highs. And solid third-quarter corporate earnings and the Fed’s loose monetary policy are expected to support the market’s momentum despite investors’ concerns about high inflation. Given the favorable trends, Wall Street analysts see more than a 25% potential upside in low-priced stocks Castlight Health (CSLT) and Lincoln (LINC). Thus, we think now could be the right time to scoop up these stocks. Let’s discuss.
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The S&P 500 registered 65 all-time highs this year and has more than doubled since the onset of the COVID-19 pandemic. The benchmark saw eight straight all-time closing highs last week. Although the major benchmarks dipped in their last trading session due to concerns over the market’s vulnerability to rising inflation and a surge in COVID-19 cases, the indices are still hovering near their record highs. The Dow is just 1.7% shy of its all-time high, while S&P 500 and Nasdaq are down 0.6% and 0.8% from their record highs, respectively.
Also on the positive side macroeconomically, weekly jobless claims are expected to reach a new pandemic-era low. Analysts expect unemployment claims to come in at 260,000 versus 267,000 reported in the prior week, which would mark the sixth straight week with jobless claims below the 300,000 level. Also, President Biden recently signed the long-awaited trillion-dollar bipartisan infrastructure bill into law, which could potentially boost the U.S economy further.
The economic recovery, low-interest-rate environment, and solid corporate earnings should continue supporting the stock market. Given this backdrop, Wall Street analysts expect low-priced stocks Castlight Health, Inc. (CSLT) and Lincoln Educational Services Corporation (LINC) to rally by more than 25% in the near term. This, along with solid fundamentals, we think makes these stocks good bets right now.
Castlight Health, Inc. (CSLT)
CSLT provides health navigation solutions for employers and health plan customers in the education, manufacturing, retail, government, and technology industries in the United States. Its health navigation platforms provide a comprehensive health and wellbeing experience. CSLT is based in San Francisco. In August, CVLT announced the addition of four new partners to its industry-leading digital health ecosystem: Spring Health, WW, SWORD Health, and Progyny (PGNY). The company expects these new partnerships to strengthen its position as the most comprehensive digital hub that employers and health plans can offer their participants, while also enabling CSLT to address complex workplace health challenges.
CSLT also updated its annual medical spend analysis for 2020 to reflect that user that engaged with the CSLT platform had incurred lower total medical spending in 2020 versus 2019, compared to non-users within CSLT customers‘ populations. This demonstrates its expertise in healthcare navigation.
CSLT’s professional services revenue increased 213.5% year-over-year to $3.16 million in its fiscal third quarter, ended September 30. Its net cash provided by operating activities stood at $5.84 million, up 113.2% from the same period last year, while its cash and cash equivalents balance came in at $66.91 million, indicating a 39.6% increase year-over-year.
A $36.10 million consensus revenue estimate for its fiscal first quarter, ending March 2022. indicates a 3% improvement year-over-year. Analysts expect the company’s EPS to increase 30% per annum over the next five years.
CSLT has gained 46.2% in price year-to-date. Over the past year, the stock has gained 61% to close yesterday’s trading session at $1.83. The $2.35 median price target indicates a 28.4% potential upside from its last closing price.
It is no surprise that CSLT has an overall B grade, which equates to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 distinct factors, with each factor weighted to an optimal degree.
CSLT also has a B grade for Value and Quality. It is ranked #16 of 87 stocks in the Medical – Services industry. Click here to view additional CSLT ratings for Growth, Sentiment, Momentum, and Stability.
Note that CSLT is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
Lincoln Educational Services Corporation (LINC)
LINC provides various career-oriented post-secondary education services to high school graduates and working adults in the United States. The company operates through three segments: Transportation and Skilled Trades; Healthcare and Other Professions; and Transitional. LINC is based in West Orange, N.J.
In November, LINC completed the sale and lease-back transactions of its Denver, Colo., and Grand Prairie, Tex., properties for an aggregate sales price of $46.5 million. The company intends to use the net proceeds to fund growth initiatives, upgrade existing facilities, and other working capital needs.
Also in November, LINC collaborated with Republic Services, Inc. to open the diesel industry’s first dedicated training facility in Dallas, Tex. This collaboration should help LINC grow in its diesel technology domain.
LINC expects to launch the Kindig Academy at its Denver, CO campus in early 2022 to bring a custom vehicle fabrication and advanced design skills program. “Earning a Kindig Academy certification is a unique credential for a custom vehicle designer and fabricator,” said Chad Nyce, Lincoln Tech’s Executive Vice President and Chief Innovation Officer. The exclusive availability of this training at its campus should benefit LINC in many ways.
LINC’s revenues increased 13% year-over-year to $89.06 million in its fiscal third quarter, ended September 30. Its operating income grew 49.6% from its year-ago value to $5.75 million. Income available to common shareholders came in at $3.54 million, up 45% from the same period last year. And the company’s EPS increased 37.5% year-over-year to $0.11.
Analysts expect LINC’s revenues to increase 5.8% year-over-year to $86.52 million in the current quarter. A $0.47 consensus EPS estimate for the current quarter indicates a 51.6% rise from the prior-year quarter. The company has an impressive earnings surprise history; it has beaten the consensus EPS estimates in each of the trailing four quarters.
Shares of LINC have gained 18.9% in price over the past year and 13.2% year-to-date to close yesterday’s trading session at $7.39. The $11.50 median price target indicates a 55.6% potential upside from its last closing price. The 12-month price targets range from a low of $9.50 to a high of $15.00.
LINC’s strong fundamentals are reflected in its POWR Ratings. LINC has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. LINC has an A grade for Sentiment, and a B grade for Growth, Value, Stability, and Quality. Among the 26 stocks in the Outsourcing – Education Services industry, LINC is ranked #1.
Beyond what we have stated above, we have also rated LINC for Momentum. Click here to view all LINC ratings.
Note that LINC is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
CSLT shares were unchanged in premarket trading Thursday. Year-to-date, CSLT has gained 40.77%, versus a 26.44% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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