By Philip van Doorn, MarketWatch
All 45 sell-side analysts who cover Amazon.com rate the stock a “buy.” That is incredible, considering the shares trade for about 71 times the forward consensus earnings estimate, more than four times that of the benchmark S&P 500 Index.
How high are the forward price-to-earnings (P/E) ratios for other highly rated stocks? How risky might it be to follow the investing herd and jump in?
Tomi Kilgore wrote about the risks associated with such strong sentiment for Amazon /zigman2/quotes/210331248/composite AMZN -1.79% , as well as opportunities for short-term traders wishing to “play” the internet retail giant’s first-quarter earnings report Thursday after the stock market closes.
Among the S&P 500 /zigman2/quotes/210599714/realtime SPX -1.12% , a “perfect” list of sell-side ratings is a rarity. Only one company besides Amazon is rated “buy” or the equivalent by all analysts polled by FactSet: Marathon Petroleum /zigman2/quotes/209634297/composite MPC +0.50% has top ratings among all 19 analysts covering the company. Its shares trade at a forward P/E ratio of only 10.7. Marathon was recently included in this list from Barron’s: “10 stocks with safe, generous dividends.”
Reluctant to say ‘sell’
There is a reason why it is important to distinguish sell-side analysts (most of whom work for brokers who want their customers to buy shares) and buy-side analysts, who work for money managers. The sell-side tends to be bright and sunny: Only two companies among the S&P 500 have majority “sell” or equivalent ratings:
• Campbell Soup /zigman2/quotes/202107764/composite CPB -0.33% Nine of 16 analysts rate the stock a “sell” or the equivalent. The shares trade at a forward P/E ratio of 15.8. Interestingly, the shares are up 20% this year (including reinvested dividends), following a 29% drop in 2018. As part of its effort to simplify its business, Campbell announced a deal to sell its Bolthouse Farms unit to Butterfly Equity for $510 million. Here’s a look at Campbell’s turnaround attempt and the results so far.
• Franklin Resources /zigman2/quotes/201997162/composite BEN +1.05% The holding company of Franklin Templeton Investments is rated a “sell” or the equivalent by eight of 15 analysts polled by FactSet. The shares trade for 13.7 times the consensus forward earnings estimate. This is another recovery story so far in 2019, with the shares returning 20.5% after sliding 23% in 2018.
Looking for ‘perfect’ sets of ratings
If we expand our list to the S&P 1500 Composite Index, which includes the S&P 500, the Small-Cap 600 Index /zigman2/quotes/210599868/delayed SML -0.60% and the S&P 400 Mid-Cap Index /zigman2/quotes/219506813/composite MID +0.29% , there are 93 companies that all analysts consider a buy. That is a tremendous number. However, many are covered by a small number of analysts.
So here are the 39 stocks among the S&P 1500 that are covered by at least five analysts, with all rating the shares “buy” or the equivalent. The list is sorted by ascending forward price-to-earnings ratio.
|Company||Ticker||Forward P/E ratio||Number of analysts||Closing price - April 23||Consensus price target||Implied 12-month upside potential|
|Ligand Pharmaceuticals Inc.||/zigman2/quotes/202030140/composite LGND||4.0||6||$128.38||$212.40||65%|
|Mercer International Inc.||/zigman2/quotes/206874586/composite MERC||6.4||6||$14.10||$22.50||60%|
|SLM Corp||/zigman2/quotes/205828282/composite SLM||7.7||12||$9.93||$13.79||39%|
|Ameris Bancorp||/zigman2/quotes/208317759/composite ABCB||8.3||6||$35.26||$47.21||34%|
|Enova International Inc.||/zigman2/quotes/203319837/composite ENVA||8.3||5||$25.83||$34.20||32%|
|Conn's Inc.||/zigman2/quotes/206772377/composite CONN||8.9||6||$24.76||$36.50||47%|
|SYNNEX Corp.||/zigman2/quotes/208755595/composite SNX||9.0||8||$107.65||$127.14||18%|
|Veritex Holdings Inc.||/zigman2/quotes/201489855/composite VBTX||10.4||6||$25.94||$32.33||25%|
|Redwood Trust Inc.||/zigman2/quotes/204538394/composite RWT||10.4||6||$16.40||$17.92||9%|
|Marathon Petroleum Corp.||/zigman2/quotes/209634297/composite MPC||10.7||19||$61.06||$88.59||45%|
|Rayonier Advanced Materials Inc.||/zigman2/quotes/210451852/composite RYAM||11.9||6||$15.49||$20.50||32%|
|G-III Apparel Group, Ltd.||/zigman2/quotes/201364718/composite GIII||12.9||9||$42.53||$48.89||15%|
|Lumentum Holdings Inc.||/zigman2/quotes/204419752/composite LITE||13.7||17||$62.09||$69.19||11%|
|Ultra Clean Holdings Inc.||/zigman2/quotes/208969279/composite UCTT||14.0||5||$12.13||$15.40||27%|
|Ichor Holdings, Ltd.||/zigman2/quotes/207291086/composite ICHR||14.4||6||$24.87||$25.83||4%|
|Helen of Troy Limited||/zigman2/quotes/205565021/composite HELE||14.7||5||$116.60||$142.60||22%|
|LCI Industries||/zigman2/quotes/208281861/composite LCII||15.5||7||$91.67||$93.17||2%|
|First BanCorp (Puerto Rico)||/zigman2/quotes/202320876/composite FBP||15.7||6||$11.56||$12.92||12%|
|Archrock Inc.||/zigman2/quotes/206867288/composite AROC||16.0||5||$10.86||$14.25||31%|
|Harsco Corp.||/zigman2/quotes/208039417/composite HSC||16.3||5||$22.75||$31.50||38%|
|Perficient Inc.||/zigman2/quotes/201848718/composite PRFT||16.8||6||$28.75||$33.50||17%|
|Dave & Buster's Entertainment Inc.||/zigman2/quotes/203157296/composite PLAY||17.5||11||$54.02||$63.10||17%|
|Brink's Co.||/zigman2/quotes/203540504/composite BCO||17.8||6||$81.07||$98.20||21%|
|QuinStreet Inc.||/zigman2/quotes/202100806/composite QNST||20.1||6||$13.86||$19.85||43%|
|Virtusa Corp.||/zigman2/quotes/205784302/composite VRTU||20.5||8||$54.39||$63.71||17%|
|Addus HomeCare Corp.||/zigman2/quotes/203511287/composite ADUS||29.0||7||$65.02||$77.86||20%|
|Cubic Corp.||/zigman2/quotes/204118116/composite CUB||29.0||7||$56.17||$77.17||37%|
|Helix Energy Solutions Group Inc.||/zigman2/quotes/201162236/composite HLX||29.8||8||$8.58||$10.58||23%|
|BioTelemetry Inc.||/zigman2/quotes/204463018/composite BEAT||30.5||6||$58.57||$83.83||43%|
|Monolithic Power Systems Inc.||/zigman2/quotes/204177258/composite MPWR||38.2||10||$154.70||$151.00||-2%|
|Digi International Inc.||/zigman2/quotes/203836067/composite DGII||44.9||7||$13.04||$17.29||33%|
|InterDigital Inc.||/zigman2/quotes/200883544/composite IDCC||60.3||5||$66.56||$95.40||43%|
|Amazon.com Inc.||/zigman2/quotes/210331248/composite AMZN||70.7||45||$1,923.77||$2,128.32||11%|
|DSP Group Inc.||/zigman2/quotes/204384782/composite DSPG||71.7||5||$14.76||$15.40||4%|
|NeoGenomics Inc.||/zigman2/quotes/202492506/composite NEO||84.4||9||$20.17||$22.50||12%|
|LivePerson Inc.||/zigman2/quotes/203565636/composite LPSN||N/A||12||$28.79||$33.42||16%|
|Progenics Pharmaceuticals Inc.||N/A||6||$5.07||$10.08||99%|
|Green Plains Inc.||/zigman2/quotes/204775795/composite GPRE||N/A||5||$17.21||$20.20||17%|
You can click on the tickers for more on each company, including business profiles and stock performance.
There are no forward P/E ratios for the last three companies on this list because analysts expect their combined earnings for the next 12 reported months to be negative.
The ratings alone never mean anyone should simply take the plunge. But they can serve as a starting point for your own detailed research.
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