Making sense of the stock markets is a challenge – and a straightforward task. The collective information generated tens of thousands of stocks and traders gives investors everything they need to know – but sorting through that mountain of raw data presents a whole nother issue.
TipRanks makes it easy. The platform and data tools let investors put some order on the data vortex, bringing up the latest scoop on more than 9,600 stocks and 7,700 Wall Street analysts. For investors seeking a more refined tool, there is the Smart Score, a valuable data tool that aggregates 8 separate key factors for every stock, factors which are known to correlate with future returns, and uses them to create a reified score on a scale of 1 to 10. A stock with a ‘Perfect 10’ scores high on most of the key factors – although a stock doesn’t need to score high on every factor to get a 10.
The Smart Score, and especially the 10s, can guide investors toward the stocks that are primed for gains. That’s a vital advantage, especially in a challenging market environment like the last six weeks have shown us.
With this in mind, we’ve pulled up two stocks with a ‘Perfect 10’ from the Smart Score, which have outperformed the broader market this year. Let’s take a closer look.
Schlumberger Limited (SLB)
We’ll start with a company that combines the strengths of two major industries. Schlumberger is an oil field services company, a firm involved the drilling, well completion, and oil production of hydrocarbon business. These are tasks that the major oil companies – with their own focus on exploration – sometimes cannot do well. By specializing, Schlumberger can fill a vital niche in a vital industry.
A combination of factors, including the corona pandemic crisis and the Biden Administration’s policy de-emphasis on fossil fuels, has put serious headwinds in front of Schlumberger. A macro look at revenue tells the story. The top line for the full year 2019 came in at $33 billion; that was down to $23.6 billion in 2020, and $22.9 billion in 2021.
At the same time, Schlumberger’s earnings and share price have both recovered to pre-pandemic levels. At the bottom line, EPS for 4Q21 came in at 42 cents; this was up 8% from Q3 and an impressive 56% year-over-year. While full-year revenues remained down, the quarterly top line of $6.22 billion was the best print since 1Q20. Accordingly, the company’s share price is up 36% this year, far outpacing the overall market.
Turning to the Smart Score, Schlumberger earns its ‘Perfect 10’ with bullish readouts on 7 of 8 key factors. Hedge funds and individual investors are all buying in, and the industry bloggers and news sentiment are both highly positive.
Among the bulls is Evercore analyst James West who takes a detailed look at this company, and sees it in a strong position for the near future.
“Schlumberger’s returns-focused strategy is clearly working as the company brilliantly executed a choppy 2021 and is set for a major inflection as the upcycle takes hold in 2022 and beyond. The company remains focused on delivering returns above the cost of capital, moving margins and free cash flow higher, and leveraging its technology leadership position,” West opined.
These comments support West’s Outperform (i.e. Buy) rating here, and his $48 price target implies a one-year upside of 18%. (To watch West’s track record, click here)
West isn’t alone in his bullish stance. There’s broad agreement on Wall Street about Schlumberger’s positives, as shown by the 14 to 1 breakdown Buy reviews versus Holds. Shares are selling for $39.17 and their $44 average price target suggests an upside of 12% in the next 12 months. (See SLB stock analysis on TipRanks)
Euroseas, Ltd. (ESEA)
Now we’ll shift our focus, from hydrocarbon to shipping. Euroseas is a shipping company, in business for over a century, focuses on oceangoing haulage. The company operates a fleet comprised of intermediate- and feeder-sized container carriers, 16 in all. The vessels range from 18,000 dry weight tonnage to more than 70,000 tonnes. The oldest vessels date to the late 90s, while the newest are from 2009. Euroseas has four new ships under construction, with staggered deliveries scheduled to start in 1Q23 and continue to 1Q24.
Euroseas has benefited from the post-lockdown return to more open economic activity, especially from the resumption of global trade. While the supply chain crisis does impact the company, higher freight rates are boosting the bottom line. The company will report its 4Q21 results on February 15; a look back at the Q3 numbers may serve to show the general trends.
The company posted a top line of $23 million, and EPS of $1.17. Revenues were up 86% year-over-year, while the earnings had turned around from a mere 1-cent gain in the year-ago quarter. On a negative note, EPS missed the $1.41 expected. These occasional misses in otherwise strong results could help explain the pattern in the share price: a rising trend, with periods of volatility. Overall, ESEA shares have gained ~29% this year. The share gains reflect the company’s solid position in the reopened global trade routes.
Maxim analyst Tate Sullivan likes what he sees in Euroseas, especially in the company’s potential to convert cash into ships. He writes, “Based on $103.5M of contracted EBITDA in 2022 and our estimates for future TCE rates on ships that have expiring contracts, we estimate ESEA increases cash to $83M in 2022 from $8.8M in 4Q21E. In fact, we now forecast ESEA has more cash than debt by the end of 2023… Without higher costs and a net cash balance, ESEA can consider acquiring more ships, initiating a dividend, or repurchasing shares.”
To this end, Sullivan gives ESEA shares a Buy rating, and puts a $52 price target on the stock, indicating room for a robust 68% upside ahead. (To watch Sullivan’s track record, click here)
While there are only 2 reviews on record for Euroseas – this small-cap shipper has slipped under the radar – they both agree that it’s a Buy and give the shares a Moderate Buy consensus view. ESEA is trading for $32.04 and its $51.50 average target implies an upside of ~6`1% from that level. (See ESEA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.