You might be surprised by how many of the best-performing stocks don't have great bottom lines. Posting big net losses quarter over quarter doesn't necessarily prevent stocks from delivering tremendous gains.
Many investors, though, prefer to invest in companies that continually generate solid earnings. It's even better when these companies have attractive near-term prospects. Here are three highly profitable stocks that Wall Street thinks will soar 39% or more within the next 12 months.
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1. Bristol Myers Squibb
The consensus price target for Bristol Myers Squibb (BMY +0.12%) is 39% above the big drugmaker's current share price. Why are analysts so optimistic about the pharma stock when its shares are down close to 8% year to date? There are two main reasons.
First, BMS stock is basically dirt cheap right now. Its shares trade at a little over seven times expected earnings. This forward earnings multiple is well below the average forward price-to-earnings ratio of 13.4 for pharmaceutical stocks in the S&P 500.
Second, BMS has several drugs with strong growth potential. These include current blockbusters such as blood thinner Eliquis and cancer immunotherapies Opdivo and Yervoy. Newer products, including cancer cell therapies Abecma and Breyanzi, should also emerge as big winners for the company in the near future.
The biggest yellow flag for BMS is that its top-selling drug Revlimid faces generic competition beginning next year. However, the volumes for generics will be limited at first, thanks to contractual restrictions. This gives the company more time for its newer drugs to gain traction in the marketplace.
2. Biogen
Earlier this year, Biogen (BIIB 1.78%) was handily beating the market, with shares soaring nearly 70%. The biotech stock has since given up much of that impressive gain. However, Wall Street remains bullish about Biogen, with the average analyst's 12-month price target reflecting an upside potential of 41%.
Biogen certainly faces some challenges. Momentum for its multiple sclerosis franchise continues to wane due to generic competition for Tecfidera. Spinal muscular atrophy drug Spinraza is no longer the tremendous growth driver that it once was.
The company's hopes now largely depend on Alzheimer's-disease drug Aduhelm. However, it's possible that sales for the drug could be disappointing. Aduhelm is running into pushback from payers and physicians due to concerns that it's not effective. The U.S. Food and Drug Administration (FDA) has also received reports of potentially serious safety issues with the drug.
No one should count Aduhelm out yet, though. If the Alzheimer's disease drug comes anywhere close to achieving analysts' peak sales estimates, Biogen's share price could rebound significantly.
3. Vertex Pharmaceuticals
Wall Street's consensus price target for Vertex Pharmaceuticals (VRTX 1.72%) is 42% above the current share price for the biotech. There's no doubt that Vertex's cystic fibrosis (CF) drugs are the main factor behind this optimistic outlook.
No other company is even close to launching a drug that treats the underlying cause of CF. Meanwhile, Vertex already has four approved CF therapies. But the company still hasn't fully capitalized on its monopoly. More than 30,000 of the estimated 83,000 eligible patients for Vertex's drugs aren't on the treatments yet.
The big biotech also hopes to expand beyond CF. Vertex and its partner CRISPR Therapeutics could be in a position to file for regulatory approvals of gene-editing therapy CTX001 in treating rare blood diseases beta-thalassemia and sickle cell disease in 2023. Vertex's pipeline also includes a couple of phase 2 programs, one targeting rare kidney diseases and the other targeting pain.
Some might view Vertex's pipeline as relatively light. That could change in the not-too-distant future, though. The company's cash stockpile tops $6.7 billion. Vertex's management has hinted at plans to use its cash to bolster the pipeline through business-development deals.
