Successful market investing is all about finding opportunities, and buying into the right stocks at low prices. The only real ‘trick’ to navigating the market is recognizing those opportunities, since ‘low prices’ is a relative concept, not an absolute. A low price for a famously expensive stock like Amazon will still be in the thousands, while a low price for an obscure penny stock may be less than one dollar.
A look at stock charts will help to find companies whose shares are trading at a discount. It’s a recognized strategy, and every investor knows about ‘buying the dip’ and using a current low in a stock’s trading price as a point of entry.
With this in mind, we scoured the TipRanks database and picked out 2 names which have been pinpointed by those in the know as representing a buying opportunity. Both are trading at relative low prices, and that comes with substantial upside potential. Let’s take a closer look.
Opportunity Financial (OPFI)
Let’s start in the fintech sector, where Opportunity Financial, or OppFi, provides a credit access platform for consumer use. Customers can download the app to their smartphone, and access credit through a completely digital process, with fast applications, fair and transparent decisions, and quality customer service. Among the services offered are loans and payroll-linked credit.
OppFi bases its business model on the large population – estimated at 60 million – of consumers who have difficulty accessing traditional sources of credit. These are people with regular work, but minimal savings and occasional financial emergencies that tap what resources they do have. OppFi’s ‘target customer’ has an annual income less than $50K.
The need for credit in OppFi’s target population is apparent from the company’s growth numbers. OppFi reported an 84% year-over-year growth in net originations during Q2, and a 28% yoy gain in revenue. It was a solid performance for a company that only went public this past July.
That move to the public markets was accomplished via a SPAC merger. OppFi entered into a business combination with FG New America Acquisition, a special purpose acquisition company, and the OPFI ticker started trading on July 21. Since then, however, the shares have dropped by 22%.
That drop opens up the opportunity for investors, according to D.A. Davidson analyst Christopher Brendler.
“With the stock reaching a new low [concurrent with] encouraging 2Q results, we see a compelling buying opportunity as the stock is now ridiculously cheap. We project OppFi to grow revenue 112% and EPS 98% (2020A-2022E) yet the stock now trades under 10x 2022E EPS,” Brendler opined.
In line with this view, Brendler rates OPFI shares a Buy, along with a $14 price target. Investors could be sitting on gains of ~72%, should Brendler’s forecast play out over the coming months. (To watch Brendler’s track record, click here)
This newly public stock has attracted some positive attention from Wall Street, with 3 Buy recommendations giving it a unanimous Strong Buy consensus rating. The shares are trading for $8.10, and their $13.83 average price target implies ~70% upside potential for the coming year. (See OPFI stock analysis on TipRanks)
Scorpio Tanker (STNG)
Now let’s shift gears, and enter the world of international shipping. Scorpio Tanker is a shipping company in the oil and petrochemical business, operating a fleet of ocean-going tanker vessels in the Handymax, MR, and LR1 and LR2 size ranges. The MR and LR ships are commonly used general purpose oil tankers, and will carry both crude oil and refined products. They are capable of operating in most ports around the world – but Scorpio also operates a large number of smaller Handymax vessels, giving it access to small ports as well.
The economic reopening, and the resumption of much trade, was positive for Scorpio, as investors turned bullish on shipping generally with the resumption of the global carrying trade. The company saw its share price rise steadily through the first half of this year, peaking in late June. Since then, the stock has pulled back by 38%.
That pullback has come as Scorpio reported a difficult second quarter. The company saw a net EPS loss of 97 cents, compared to the per-share profit of $2.40 reported in the year-ago quarter. Revenue came in at $139.4 million, down from $346.2 million in 2Q20. The losses, and the fall in revenue, reflect a lag inherent in shipping and supply chains; that is, orders placed don’t get sent out immediately. It is one reason why, even though economies are reopening, the shipping industry is facing headwinds.
H.C. Wainwright analyst Magnus Fyhr remains unfazed, and notes that the tanker company is in a sound position to take advantage of an improving shipping environment later this year.
“…we believe a global economic recovery and rising vaccination rates should increase mobility levels and support stronger global oil demand in 2H21. In fact, following two months of decline, oil demand surged by an estimated 3.2 mb/d to 96.8 mb/d in June, with 2H21 on course to rise 4.6 mb/d versus 1H21 levels, to 98.7 mb/d,” Fyhr noted.
The analyst continued, “With product tanker fundamentals starting to improve, we believe asset values should continue to strengthen and that an improving liquidity position should address any balance-sheet concerns. As a result, we continue to like STNG as a product tanker pure play and believe the recent pullback has created an attractive buying opportunity.”
Based on the above, Fyhr rates STNG shares a Buy, and his $28 price target implies an upside of ~89% this year. (To watch Fyhr’s track record, click here)
As for the rest of the Street, STNG has been assigned 5 Buys, 1 Hold and 2 Sells. This translates to a Moderate Buy consensus rating. The average price target lands at $21.88, and represents upside potential of ~47%. (See STNG stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
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.