2 Solid Quant-Rated Growth Stocks With High Consensus Upside (SA Quant)

SA’s Quant Team has identified two stocks with strong momentum and growth fundamentals that also have significant potential upside based on consensus price targets. SA’s Quant Ratings provide unemotional, objective, data-driven evaluations of stocks based on over 100 sector relative metrics. The stocks are graded across five categories: Valuation, Profitability, Growth, Momentum, and EPS Revisions. The first three Factor Grades aim to identify mispriced securities by looking at investment fundamentals, and the others relate to market timing.

Wall Street price targets are sell-side analyst projections of where a stock might be trading within a given time period – typically about a year. Sell-side analysts have significant time and resources to conduct in-depth industry and market research and are also responsible for setting the consensus earnings targets companies must meet every quarter. Hence, it is worth weighing consensus price targets.

Ocular Therapeutix, Inc. (OCUL)

• Market Capitalization: $712M

• Quant Rating: Buy

• Wall Street Price Target Upside: ~80%

• Quant Sector Ranking (as of 2/15/24): 77 out of 1082

• Quant Industry Ranking (as of 2/15/24): 14 out of 206

Ocular Therapeutix, Inc. (OCUL) is a biopharmaceutical company that develops and commercializes therapies for diseases and conditions of the eye. Last month, the FDA agreed to OCUL’s request to amend its proposed design for phase 3 trial of Wet AMD candidate Axpaxli, which treats visual impairment in elderly patients. OCUL said it anticipates expanding eligibility criteria will accelerate trial enrollment. OCUL is among the top 10% of quant-rated stocks in the pharmaceuticals industry. OCUL’s strengths are highlighted by Quant Factor Grades that include an A in Growth and A+ in Momentum. OCUL’s stock is up more than 50% in the past 30 days.

OCUL revenue grew by a factor of more than 25x from 2018-2022 ($2 million to $51.5 million). OCUL sales growth is over 15% YoY, more than 150% above the sector median, and forward Revenue Growth is nearly 20%.

The company has seen two earnings upward revisions in the last 90 days. According to consensus estimates, OCUL revenue is projected to grow by around 23% in FY 2024, 30% in 2025, 58% in 2026, and 50% in 2027. By 2028 the company is expected to reach almost $300 million in sales, based on the consensus estimate. Consensus estimate has OCUL revenue at over $900 million by 2032.

According to Ocular’s Wall Street price target average, the stock has around 80% upside potential. OCUL has seven Buy/Strong Buy ratings in the past 90 days and 1 Hold for a Wall Street Buy Rating score of 4.37. Bank of America initiated coverage with a Buy earlier in February, saying that Axpaxli’s initial data is support of a competitive profile over current standard of care. BoA projected $870 million in risk-adjusted peak sales for Axpaxli.

FAT Brands Inc. (FAT)

• Market Capitalization: $152.4M

• Quant Rating: Buy

• Wall Street Price Target Upside: ~118%

• Quant Sector Ranking (as of 2/15/24): 43 out of 523

• Quant Industry Ranking (as of 2/5/24): 3 out of 44

FAT Brands Inc. is a multi-brand restaurant company that acquires, develops, and manages quick service and casual dining restaurants worldwide, such as Johnny Rockets, Fatburger, and Round Table Pizza. FAT is near the top of SA’s list of quant-rated Restaurants Stocks. FAT has an A+ in Growth and A in Momentum Factor Grades, a B+ in Valuation, C+ in Revisions, and a D in Profitability for a Quant Buy Rating of 4.45. The stock is up around 20% in the past year and over 40% in the past month.

FAT grew 120% over the previous five years (from $17.8 million in revenue to $407.2 million) and is projected to grow 15% in FY 2023. FAT opened 125 new stores in 2023 and now has 1,200 units in its development pipeline with 150 more units expected to open in 2024. FAT opened restaurants in non-traditional spaces including theme parks, airports, and hospitals. EPS and revenue are projected to grow 30% in 2024 based on consensus estimates.

FAT revenue Growth (YoY) is 12% and Revenue Growth (FWD) is almost 75%. EBIT Growth (FWD) is over 260%, crushing the sector median.

FAT has a Strong buy rating in the past 90 days from two Wall Street analysts with average price target upside potential of around 118%.

Risks

Both companies are cash flow negative and not expected to see profits in the next 2-3 years, according to consensus estimates. There are also risks that need to be considered when looking at Wall Street target prices. An S&P Global study recommended investors focus on shifts in consensus recommendations and not on price targets alone.

Conclusion

We reviewed OCUL and FAT stocks that have SA Quant Buy Ratings and significant upside potential according to Wall Street analysts’ target prices. According to the data, both stocks could see significant growth in sales and profits over the next two years. In addition to these two stocks, we have many top stocks to choose from, or if you’re seeking a limited number of monthly ideas from the hundreds of top quant stocks, consider exploring Alpha Picks.