After a stunning rally off the lows caused by the Brexit, it looks as though the market feels a little tired. Tuesday’s selling, while calm, shows that investors are still nervous over the potential for some disruption by the vote in the United Kingdom, and Wednesday looks like it will be more of the same. One thing is for sure, valuations will be more and more important as we tackle the second half of 2016, and it makes sense to shop for growth stocks with low multiples and solid upside potential.
A recent research report from Jefferies highlights top growth stocks to buy that make very good sense for the rest of the year. They have traded lower for numerous reasons, and all are offering investors top quality companies and bargain price entry levels. They are rated Buy at Jefferies.
This company could have a revenue explosion over the next three years if the Jefferies team is right. Acadia Healthcare Co. Inc. (NASDAQ: ACHC) is a provider of in-patient behavioral health services. Acadia operates a network of 226 facilities with approximately 9,200 beds in 37 states, the United Kingdom and Puerto Rico. Acadia provides psychiatric and chemical dependency services to its patients in a variety of settings, including in-patient psychiatric hospitals, residential treatment centers, outpatient clinics and therapeutic school-based programs.
The company posted stellar earnings last year, and Jefferies thinks that its revenues can double in three years, owing to not only strong organic growth, but potential acquisitions. Also cited in the past was that analysts believe political support for expanded Medicaid coverage for adult mental health could grow the company’s addressable market by up to 30%.
The firm also noted that the stock was punished after the Brexit, as 40% of EBITDA is from the United Kingdom and concerns over the country leaving the European Union weighed heavily on shares last week. The analysts expect organic growth to remain strong, and recent meetings with management has made them even more positive on the stock.
The Jefferies price target is $85, and the Thomson/First Call consensus figure is posted at $79.27. The stock closed Tuesday at $52.50, down almost 4% on the day.
This company was one of the top Jefferies biotech picks for 2016. Celgene Corp. (NASDAQ: CELG) has an outstanding partnered pipeline, which most think is low risk and has the potential to yield several blockbuster drugs. Certain Wall Street analysts also think the company can grow earnings 15% on a compounded annual growth rate basis going forward. Otezla, which treats psoriasis and psoriatic arthritis, had achieved considerable prescriptions among physicians, but the scripts have slowed after a solid launch, showing the importance for sales outside of the United States.
Celgene’s blockbuster blood cancer drug Revlimid continues to dominate. Pomalyst sales also continue to be solid. Cancer drug Abraxane is also growing at a respectable rate, so the company continues to have a strong lineup of top-selling drugs.
The stock jumped recently when Celgene and Natco came to a patent settlement, which removed a huge overhang on the stock that has been there for some time. Revlimid makes up over 60% of the company’s total revenue, and the analysts note that the company has discussed at its recent conference the benefits of longer duration Revlimid. They also note that Celgene has a very compelling pipeline, and the Brexit should have little impact on the biotech sector as a whole.
The Jefferies price target is $140. The consensus target is higher at $136.38. The shares closed Tuesday at $100.25.