As the second half of 2023 progresses, it’s time to take stock of the stock market’s current state and examine stock analysts’ picks for their “top picks” for the remainder of the year.
Analysts analyzed each stock, taking into account its past and current performance, trends over different timeframes, as well as management’s plans. They consider every aspect before making their recommendations, which provide valuable guidance for building a resilient portfolio.
Several of these “top picks” really deserve the extra notice, and a look at recent breakdowns of three of them, taken from TipRanks platform, tells stories. The stock picks make for an interesting combo, from a variety of slides and feature a rage of different themes. Let’s take a closer look.
Franklin Covey (FC)
First up, Franklin Covey, is a leadership training company that provides leadership and life coaching services. The company is named for two foundations in its approach: the writings of Benjamin Franklin and the leadership research of Stephen Covey, author 7 habits of highly effective people. Franklin Covey uses what he describes as the “timeless principles of human effectiveness,” working to give each learner the “mindset, skill set, and toolkit” needed to maximize performance for results.
Franklin Covey has undergone a transformation in her methods over the years. It began with the publication and distribution of books and printed leadership materials, and then expanded to include personal leadership lessons, training, and seminars. Later, the company offered live online video courses and eventually moved to primarily conducting online courses via live streaming through a subscription model. The company currently offers courses in over 160 countries and boasts over 15,000 client engagements annually. In addition, its “The Leader in Me” schools, which provide classes designed for K-12 students, number over 5,000 and are available in 50 countries.
All this makes Franklin Covey a giant in the self-help industry. The company generated $262.8 million in total revenue for fiscal year 2022, and continues to show strong performance during fiscal year 2023.
Franklin Coffey recently announced its financial results for the third quarter, revealing record quarterly sales. At the top, the company reported third-quarter revenue of $71.44 million, which was up 8% year-over-year, and beat expectations by about $1.81 million. This growth was primarily driven by an 18% increase in revenue for the company’s education division. On the bottom line, Franklin Covey had earnings per share of 32 cents, beating expectations by 15 cents per share.
Combined, all of this explains why Franklin Covey is the top pick for 5-star Northland analyst Nihal Chukchi. Chokshi makes his upside point by point, writing: “We’re raising FC to a top pick within our coverage given that (i) billed value is rising year-on-year, and other key metrics are trending positively as well. (ii) ~3x upwards represents 12-month PT, (iii) what we believe is minimal downside risk given stocks trade at around 12x EV/FCF despite mid-teen EBITDA growth and FCF margin to young teens and (4) the FCF Board of Directors strongly notes that the stock is undervalued with an accelerating buying rate and increasing % of repurchases.”
Along with the “Best Pick” status, Chokshi rates FC shares as Outperform (i.e. Buy), with a price target of $100 which implies a strong 1-year upside potential of ~121%. (To see the chronicle of the Chukchi Tale, click here)
Like Chokshi, other analysts are also taking a bullish approach. FC’s Strong Buy consensus rating is divided into 3 Buy, No Hold, or Sell. The stock is selling for $45.30, and the average price target of $72 suggests an upside of roughly 59% over a one-year horizon. (be seen FC stock forecast)
Freesia, Inc. (PHR)
The second stock on this list of top picks is Phreesia, a software company in the healthcare world. Freesia offers a SaaS application for healthcare organizations, to automate and maintain patient intake – including registration, scheduling, clinical support, follow-up and payments.
Health care is a huge industry, expected to make up $6.8 trillion in the American economy just five years from now. This gives Freesia huge scope for expansion, and the company is working to fill it with quality services. So far, the results are promising. About 89% of Freesia customers acknowledge that the company has made visible improvements in their organization, while 9 out of 10 customers describe the service as “high quality” and would recommend it to a friend. Freesia is proud that its services facilitate more than 120 million patient healthcare visits annually.
Freesia ended its 2023 fiscal year on January 31st, and did so with a bang. The company had annual revenue for fiscal year 23 of $280.9 million, up 32% year-over-year. Freesia posted this strong gain even as its annual revenue per customer for healthcare services declined 6% year-over-year, to $72,599. However, the company’s average number of healthcare services customers for the year grew 38% from a year earlier, to 2,856.
Going into fiscal 2024, Freesia continues to show strong performance. The financial results for the first quarter, released last May, showed a top line of $83.8 million, another 32% increase year-over-year, and came in $2.63 million above expectations. The quarterly average number of healthcare services clients was 3,309, an increase of 31% year-on-year. On the bottom line, Freesia’s first-quarter earnings came in at negative $0.70 per share. This was a significant improvement over the loss of 99 cents reported in the prior year quarter, and it beat estimates by 5 cents.
For investors, this adds up to a solid company that is growing into an expanding niche. Analyst Jessica Tassin, who covers shares of Piper Sandler, is optimistic about the company’s potential. Tassan has included Freesia in its “Top Choice” list and expresses confidence in its future prospects.
“We have confidence that PHR can achieve a run rate of $500 million by the end of FY25; we believe there may be an upside to the company’s profitability targets for FY25. While we believe the business is undervalued on a standalone basis, we also see the strategic value in PHR as potentially a key acquisition target for large, vertically integrated MCOs that aim to build diversified healthcare banking operations with B2B and DTC lending capabilities.”
“PHR facilitates $1 billion in quarterly patient payment volume, giving visibility across all practice groups. As such, TTOs can provide revenue cycle optimization tools; structure and time reimbursement to incentivize appropriate care; and provide competitive working capital bridging loans to providers. We believe that such initiatives, with PHR’s innate ability to address staffing challenges, can encourage new providers to join the MCO network,” Tassin added.
These comments come with an Overweight (ie Buy) rating, and Tassan’s price target, set at $43, is implying an upside of ~37% over the next 12 months. (To watch Tassan’s record, click here)
Turning to the rest of the street, the bulls put him on this street. With 8 Buys and 1 Hold assigned in the past three months, the word on the street is that PHR is a Strong Buy. At $39, the average price target indicates an upside potential of 24%. (be seen PHR stock forecast)
Limited Health (health)
Last but not least, Afia, another noteworthy stock in the medical sector. Afia operates primarily in Latin America and is headquartered in Brazil, and has established itself as a leading force in the medical education landscape in the region. The company’s primary focus is to provide a comprehensive “doctor-centered ecosystem” for medical students and physicians in Brazil. From guiding them through their medical school journey to supporting their residency and continuing medical education programs, Afia collaborates closely with physicians to ensure they remain on the cutting edge of medical knowledge throughout their practice.
In addition, Afia offers several applications geared towards medical services that medical professionals and students alike can use to access relevant medical content and find clinical support for medical decisions. The key here, as with an entire wellness approach, is to put knowledge at the practitioner’s fingertips. The company has seen strong demand for its services, especially post-COVID.
In the recently reported Q1 2013, Afia showed a solid 25% YoY increase in total revenue, to R709.4 million, or US$147.8 million at current exchange rates. The company’s revenue exceeded expectations by $7.8 million. Afia’s earnings were also better than expected. Non-GAAP adjusted earnings per share was listed at R$1.77, or 36 cents in the US currency, and was 4 cents higher than forecast. Afia had a cash position at the end of the first quarter of R$722.7 million. The company’s strong results have been placed on a customer base of approximately 295,000 monthly active users, doctors and medical students using Afia’s digital services.
The valuation and business model form the basis for choosing Marcelo Santos of JPMorgan Afia as a Top Pick.
“Afia is the tertiary company where we see most of the upside today, as it trades roughly in line with peers at 5.6x EV/EBITDA (vs. 5.7-6x range), while it has a distinct medicine-based business that offers much more insight and an attractive FCF profile. Furthermore, we believe the announcement of the new Mais Medicos program is a major drag, which we expect to close in August should take the pressure off the stock…we reaffirm. Afia is the best choice in the field of education,” Santos writes.
Looking ahead from here, Santos rates AFYA shares as Overweight (ie a Buy), and gives it a $20 price target that indicates AFYA will gain 28% in the one-year time frame. (To watch Santos’ record, click here)
Overall, there are 3 recent analyst reviews on this stock, all of which are positive – giving AFYA a unanimous Strong Buy rating. Shares are priced at $15.73 and the average target of $19.17 suggests an upside of ~22% over the one-year timetable. (be seen AFYA stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best stocks to buya 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.