Every investor knows that you can’t take a stock’s past performance as an indicator of future gains. It has even become an axiom, one of the common expressions we all learn in Econ 101: “Past performance does not guarantee future returns” is a common formulation. But that simple phrase, while true, raises a difficult question: How should an investor judge a stock?
The truth is that the past is a prologue, not a prophet, and investors can take advantage of past performance as one of many factors in a stock’s valuation. There is no sure path to success here, and each action should be viewed as a unique individual, which makes past performance a useful indicator, if not the only one.
Investors should also seek Wall Street’s view – are analysts impressed with the stock? And on top of that, what does the upside potential look like?
We now have a useful profile for monster growth stocks: gangbuster gains, buy ratings from the body of Wall Street analysts, and considerable upside for the year ahead. Two stocks in the TipRanks database are all signaling these signs of strong forward growth. Here are the details.
BELLUS Health (BLUE)
The first stock we’ll look at is BELLUS Health, a clinical-stage biopharmaceutical company whose research focuses on an area most of us probably never think about: hypersensitivity. It is a condition in which the patient is overly sensitive to certain stimuli – dust, pollen or chemicals – which can cause a range of symptoms, including a chronic cough. BELLUS is working on a new treatment for this, chronic cough. The company sees both an unmet medical need and a potentially large addressable market.
BELLUS has a lead drug candidate in the clinical program, BLU-5937, a P2X3 receptor agonist, which has completed Phase 2 studies and is expected to begin a Phase 3 trial in the fourth quarter of this year. In July, BELLUS announced a positive outcome of meetings with the FDA regarding the completion of Phase 2. The FDA meetings included planning for CALM’s pivotal Phase 3 trials, which will include two studies. The first, CALM 1, should recruit its first patient in 4Q22, and the main data from the CALM studies should be available in 2H24. BLU-5937 showed good pharmacokinetic characteristics during the first phases of testing with healthy volunteers.
BELLUS is therefore in an enviable position for a clinical-stage biotech – and it’s no wonder the company’s stock has risen 252% in the past 12 months, far outperforming the broader market.
Among the bulls is RBC analyst Gregory Renza who makes a clear case for buying.
“We continue to like BLU actions entering ph.III (CALM-1 and CALM-2) registration initiation of BLU-5937 at 2S2022 to generate frontline data at 2S2024 following a successful EOP2 meeting, as well as data from their study device validation… We continue to see BLU with best-in-class profile with a competitive position with key differentiation in favorable tolerability in the P2X3 space and sales potential global peak of over $1.4 billion with revenue potential of over $900 million in RCC with potential benefit label expansion to indications related to P2X3 hypersensitivity,” said Renza.
These comments come with an outperform (i.e. buy) rating, and Renza’s price target of $19 implies a 61% upside for the coming year. (To see Renza’s track record, Click here)
RBC’s view isn’t the only bullish view on BLU; the stock has 4 recent analyst ratings, and they are all positive, supporting the Strong Buy consensus rating. The shares are priced at $11.80 and their average price target of $19.25 suggests a 63% year-on-year upside. (See BLU stock forecast on TipRanks)
Cogent Biosciences (COGT)
The second stock we are looking at is Cogent Biosciences, another clinical-stage biopharmaceutical researcher. Cogent has a drug candidate in clinical trials, bezuclastinib, and several avenues of research in preclinical stages.
Bezuclastinib is a kinase inhibitor, a precision drug designed to target a particular genetic mutation, KIT D816V, which causes systemic mastocytosis. It is a serious and rare condition that affects multiple organ systems in the body. Additionally, the drug candidate can target and inhibit exon 17 mutations, which have been linked to gastrointestinal stromal tumors (GIST). Earlier stage testing, in phase 1/2, showed bezuclastinib to be safe and to show promising clinical activity.
Currently, Cogent has three ongoing trials to further assess the efficacy of bezuclastinib: PEAK is a Phase 3 trial against GIST; SUMMIT is a Phase 2 trial against non-advanced systemic mastocytosis; and APEX is another phase 2 trial, against advanced systemic mastocytosis. In June this year, Cogent released positive clinical data from the APEX trial, including a more than 50% reduction in serum tryptase and bone marrow mast cells – important clinical indicators of the disease.
In a point of interest for investors, COGT shares have soared since mid-May, gaining around 260%. Analyst Christopher Raymond, Cogent’s cover for Piper Sandler, believes the company is in a strong position to continue its gains.
“While we continue to view the mutational selectivity and safety profile of bezuclastinib as differentiated from competitors, our thesis on this name remains unchanged and we believe that bezuclastinib could become the preferred KIT targeting agent across the spectrum. We continue to see a positive setup for the stock, and this name remains one of the top small cap picks in 2022,” Raymond wrote.
Following these comments, Raymond assesses that COGT shares an overweight position (i.e. buy) and sets a price target of $22 – enough to imply an additional upside of around 56% after recent gains. (To see Zhu’s track record, Click here)
Overall, this small-cap biotech has garnered 4 recent analyst reviews – and they are unanimously positive, giving the stock a consensus strong buy rating. The mid price target of $19.25 suggests a solid 36% upside from the current trading price of $14.13. (See COGT stock forecast on TipRanks)
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Disclaimer: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.