The November Consumer Price Index (CPI) came in lower than expected, encouraging the Federal Reserve to slow the pace of interest rate hikes. The Fed slightly eased its most aggressive monetary tightening campaign in decades by raising its benchmark interest rates by 50 basis points this month after four consecutive 75-basis-point hikes.
According to data released by the Conference Board, consumer confidence improved this month with the easing of inflation. The Consumer Confidence Index now stands at 108.3, up from 101.4 in November. While consumer sentiment and the labor market improved, inflation expectations for 2023 dropped to 6.7%, the lowest in more than a year.
“Consumer confidence bounced back in December, reversing consecutive declines in October and November to reach its highest level since April 2022. The Present Situation and Expectations Indexes improved due to consumers’ more favorable view regarding the economy and jobs,” said Lynn Franco, Senior Director of Economic Indicators at the Conference Board.
Mark Zandi, Moody’s Analytics Chief Economist, believes that the economy will narrowly escape a recession, citing the recent economic and market indicators.
Given the backdrop, it could be wise to buy quality high-growth stocks CVS Health Corporation (CVS), Ooma, Inc. (OOMA), and Neurocrine Biosciences, Inc. (NBIX) for solid returns in the next year.
CVS Health Corporation (CVS)
CVS provides health services in the United States. The company operates through three segments: Health Care Benefits; Pharmacy Services; and Retail/LTC. It operates more than 9,900 retail locations and 1,200 MinuteClinic locations, online retail pharmacy websites, LTC pharmacies, and onsite pharmacies.
On December 1, CVS opened its first MinuteClinic locations in northern Delaware. MinuteClinic, the medical clinics inside select CVS Pharmacy stores, offers high-quality, affordable, and convenient care for various acute and chronic conditions for patients ages 18 months and older.
On September 5, CVS entered a definitive agreement with Signify Health (SGFY) to acquire Signify Health.
CVS Health President and CEO Karen S. Lynch said, “This acquisition will enhance our connection to consumers in the home and enables providers to address patient needs better as we execute our vision to redefine the healthcare experience. In addition, this combination will strengthen our ability to expand and develop new product offerings in a multi-payor approach.”
For the fiscal 2022 third quarter ended September 30, 2022, CVS’ total revenues increased 10% year-over-year to $81.16 billion. Its adjusted operating income increased by 3.9% from the prior-year period to $4.23 billion. In addition, the company’s adjusted earnings per share came in at $2.09, up 6.1% year-over-year.
Over the past three years, CVS’ revenue and EBITDA have grown at CAGRs of 8.9% and 5.9%, respectively.
Analysts expect CVS’ revenue and EPS for the current fiscal year (ending December 2022) to increase 7.7% and 2.6% from the previous year to $314.49 billion and $8.62, respectively. The company’s revenue and EPS for the next year are expected to grow 3.4% and 2.7% year-over-year to $325.26 billion and $8.86, respectively. Furthermore, it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past six months, the stock has declined 1.6% to close the last trading session at $93.02.
CVS’ strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
CVS has an A grade for Growth and a B for Stability and Sentiment. It is ranked first out of 4 stocks in the B-rated Medical – Drug Stores industry.
We have also given CVS grades for Value, Momentum, and Quality. Get all CVS ratings here.
Ooma, Inc. (OOMA)
OOMA provides communications services and related technologies for businesses and consumers in the United States and Canada. The company’s products and services include Ooma Office, Ooma Office Pro, Ooma Connect, Ooma Enterprise, Ooma AirDial, Ooma Premier, and Ooma Telo Air.
On November 1, OOMA added advanced call flow capabilities to Ooma Office business communications service, empowering businesses of all sizes to improve their customer and employee experience. New call flow features include Call Queue Agent Log In/Log Out, shared voicemail boxes, virtual receptionist scheduling, and Microsoft Dynamics 365 integration.
In September, OOMA acquired Junction Networks Inc., which does business as OnSIP, from Intrado Corp. for approximately $9.75 million in cash. The acquisition of OnSIP might be accretive to OOMA’s adjusted EBITDA starting in the fourth quarter of fiscal 2022 and contribute to its profitability and cash flows in the coming quarters. OnSIP is expected to add more than $10 million in annual revenue.
For the fiscal third quarter ended October 31, 2022, OOMA’s revenues increased 15.3% year-over-year to $56.68 million, while its non-GAAP gross profit grew 18.9% from the year-ago value to $36.30 million. Its non-GAAP operating income came in at $3.51 million, up 7.8% year-over-year. The company’s adjusted EBITDA rose 11.7% year-over-year to $4.50 million.
In addition, the company’s non-GAAP net income was $3.46 million, compared to $3.31 million in the prior-year period, while its non-GAAP net income per share increased 7.7% year-over-year to $0.14.
OOMA’s revenue has grown at a 13% CAGR over the past three years. Moreover, its total assets have increased at a 35.3% CAGR over the same period.
Analysts expect OOMA’s revenue for the fiscal year (ending January 2023) to increase 12.4% year-over-year to $216.06 million. The company’s EPS for the current year is estimated to grow 2.9% year-over-year to $0.53.
Likewise, the company’s revenue and EPS for the next fiscal year are expected to increase 10.4% and 13.7% year-over-year to $238.62 million and $0.60, respectively.
Moreover, the company has surpassed the consensus EPS estimates in all four trailing quarters. Over the past six months, shares of OOMA have gained 9% to close the last trading session at $13.23.
OOMA’s overall A rating translates to a Strong Buy in our proprietary rating system. The stock has a grade A for Growth. It has a grade of B for Value, Stability, and Sentiment.
Within the Telecom – Domestic industry, it is ranked first among 19 stocks. Click here for the additional POWR Ratings for Momentum and Quality for OOMA.
Neurocrine Biosciences, Inc. (NBIX)
NBIX is a leading neuroscience-focused biopharmaceutical company. It discovers, develops, and markets pharmaceuticals for neurological, endocrine, and psychiatric disorders. The company’s portfolio comprises treatments for tardive dyskinesia, endometriosis, Parkinson’s disease, and uterine fibroids and clinical programs in various therapeutic areas.
On December 22, NBIX announced that the U.S. Food and Drug Administration (FDA) accepted its supplemental New Drug Application (sNDA) for valbenazine. “This sNDA filing advances our effort to bring a potential new treatment option to the many thousands of people experiencing chorea associated with Huntington disease in the U.S. We look forward to working with the FDA as it reviews our filing,” said Eiry W. Roberts, M.D. Chief Medical Officer at NBIX.
For the fiscal 2022 third quarter ended September 30, NBIX’s revenues increased 31.1% year-over-year to $387.90 million, while its net product sales grew 31.3% year-over-year to $379.30 million. Its non-GAAP net income rose 70.5% from the year-ago value to $106.70 million, and its non-GAAP earnings per share came in at $1.08, up 68.8% year-over-year.
MCK’s revenue and EBIT have grown at CAGRs of 7% and 3.3%, respectively, over the past three years. Its levered free cash flow has improved at an 18.2% CAGR over the same period.
Analysts expect NBIX’s revenue for the fiscal year (ending December 2023) to come in at $1.48 billion, indicating a 30.7% year-over-year increase. The consensus EPS estimate of $3.68 for the ongoing year represents a 93.8% year-over-year rise. Furthermore, the company’s revenue and EPS for the next fiscal year are expected to grow 19.1% and 41% year-over-year to $1.76 billion and $5.19, respectively.
NBIX has gained 19% over the past six months and 40.8% over the past year to close the last trading session at $118.93.
NBIX’s POWR Ratings reflect this promising outlook. The stock’s overall A rating translates to a Strong Buy in our proprietary rating system.
NBIX has a grade A for Growth. It has a B grade for Value and Quality. Within the Medical-Pharmaceuticals industry, it is ranked #8 out of 159 stocks. Get all POWR Ratings for NBIX here.
CVS shares were unchanged in premarket trading Wednesday. Year-to-date, CVS has declined -7.79%, versus a -18.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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