As we’re seeing with the Russia-Ukraine war, getting world leaders to agree on diplomatic policy is a major challenge.
On a far less critical scale, the same goes for sell-side research firms when it comes to projecting a company’s earnings prospects. Opinions and EPS projections often vary widely based on revenue projections and cost assumptions.
Even with a binary decision like calling a stock a buy or sell, Wall Street analysts have a difficult time reaching the same conclusion.
Data from Refinitiv’s I/B/E/S estimates includes one through five ratings of what analysts think of a stock, with lower numbers being better. Those that score within the 1.0 to 1.5 range are deemed ‘strong buys’.
Within the entire S&P 500 only two companies currently have the strong buy label—Alphabet and Bio-Rad Laboratories. Expanding the universe to smaller capitalizations and ADRs yields a similarly small proportion of strong buy names.
These three stocks are among the select group on which the Street has reached a very bullish consensus.
Is Jabil Stock Undervalued?
Not to be confused with an emergency medical care business, Jabil, Inc. (NYSE: JBL) is a provider of electronic manufacturing services (EMS). It offers other manufacturing services as well but its main gig is electronics design and production for a diverse set of global markets, including auto, computers, and digital home.
What makes Jabil a favorite among analysts is its exposure to some of the hottest growth themes of this decade. The company is considered a key cog in electric vehicle assembly, tech-enabled infrastructure projects, and connected healthcare. These growth drivers are a big part of why management is anticipating 8% sales growth and 17% EPS growth in the current fiscal year, figures some on the Street think are conservative.
Jabil’s 9x forward P/E ratio makes the company grossly undervalued based on the growth projected for FY22 and the opportunities that lie ahead. No wonder all six firms that cover the stock call it a buy, three of which have offered bullish commentary this week. Jabil got a big boost from this on Wednesday but with price targets running as high as $90, it still has electric return potential.
Is Sanofi Stock a Buy?
French pharmaceutical giant Sanofi (NASDAQ: SNY) isn’t as widely covered stateside as it is in Europe but still garners an I/B/E/S strong buy rating. The ADR has been quite volatile of late, staging several major gaps up and down tied to Russia-Ukraine headlines.
Lately much of the attention has been on Sanofi’s Covid-19 vaccine which it is developing alongside GlaxoSmithKline. But longer term the company is positioned to benefit from an increasing global need for cardiovascular and diabetes care. Its diverse pipeline of more than 80 treatments and vaccine candidates includes several promising drugs in these fields.
After a strong performance in 2021 during which EPS jumped 16%, management is projecting double-digit earnings growth again this year. Much of the growth is expected to come from blockbuster immunology drug Dupixient, which has been approved for several conditions in the U.S. and Europe. At its peak, Dupixient is projected to haul in $11 billion in annual sales, which represents roughly one-fourth of Sanofi’s total revenue last year.
Sanofi shares go for just 12x this year’s earnings and come with 3.7% dividend yield. It makes sense that the analyst consensus is an overwhelming ‘oui’.
What are Sun Life Financial’s Growth Drivers?
Sun Life Financial, Inc. (NYSE: SLF) is a Toronto-based life insurance group with a presence in the U.S., Canada, and Asia. The company has a strong track record of profitability and above industry fundamentals that warrant a premium valuation. In the insurance space, return on equity (ROE) is a key metric and Sun Life’s 15% ROE is among the best in the business.
In addition to its geographically diverse life insurance operations, Sun Life’s MFS Investment Management subsidiary is growing nicely. It accounts for less than 20% of revenue but is poised to become a bigger part of the mix due to an aggressive expansion strategy in the voluntary benefits and private credit markets. Further expansion in Asia also bodes well for long-term growth.
The future also looks bright for Sun Life investors because it is one of the most shareholder friendly financial companies around. What it lacks in high growth it more than makes up for with a 3.8% dividend yield and stock buyback program. The stock’s recent dip from $58 to $51 is shaping up to be a radiant buy opportunity.
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