Legendary investor Peter Lynch has a straightforward perspective on corporate insiders and their actions in the stock market. He put it simply: insiders may sell shares for a range of reasons, but they only buy shares when they believe the price is going to rise.
Keeping a close watch on insiders’ stock purchases can prove to be a profitable investment strategy. Corporate insiders, which include company officers and board members, possess valuable knowledge about company policies and performance that can influence stock prices. They can utilize this information to make informed decisions when purchasing stocks, but they are required by law to publicly disclose their own stock holdings. This transparency allows the general public to gain insights from these purchases.
Bearing this in mind, we used the Insiders’ Hot Stocks tool from TipRanks to point us in the direction of two stocks flashing signs of strong insider buying, which warrant a closer look. Furthermore, these stocks are receiving strong approval from Wall Street analysts, and offer up to 120% upside potential. Let’s take a closer look.
Sarepta Therapeutics (SRPT)
The first stock we’ll look at is Sarepta Therapeutics, a biopharmaceutical company in both the commercial and clinical stages. With several approved drugs on the market and an active research pipeline, Sarepta focuses on developing precision genetic medicines for rare diseases that significantly impact patients’ lives.
Specifically, Sarepta is dedicated to creating treatments for Duchenne muscular dystrophy (DMD) and limb-girdle muscular dystrophies (LGMDs). The company’s pipeline comprises over 40 programs at varying stages, from early discovery to late-stage clinical trials. Sarepta employs a multi-platform precision genetic medicine approach, utilizing gene therapy, RNA, and gene editing to develop new drugs and drug candidates.
A key point for investors to note is Sarepta’s portfolio of approved drugs – a total of four – which generated $261.2 million in revenue for 2Q23. This marks an almost 12% increase year-over-year and exceeds forecasts by $5.36 million.
In June, Sarepta received FDA approval for Elevidys, also known as delandistrogene moxeparvovec. This is the first approved gene therapy product for DMD, administered as a one-time dose designed to address the underlying genetic cause of Duchenne. The initial patient post-approval received the drug on August 2.
Within the clinic, Sarepta is conducting several noteworthy trials. The EMBARK trial, a confirmatory Phase 3 trial for ELEVIDYS, has completed enrollment and is projected to yield top-line results later this year. Meanwhile, the ENVISION trial is evaluating SRP-9001 (delandistrogene moxeparvovec) as a gene therapy for both ambulatory and non-ambulatory Duchenne patients. Additionally, the NAVIGENE study, which began dosing in Q2, is assessing safety, tolerability, and efficacy of drug candidate SRP-6004 for treating LGMD2B/R2, or dysferlinopathy.
Turning to the insiders, we find Michael Andrew Chambers, a member of the company’s Board of Directors, showing his confidence in SRPT through substantial stock purchases this month. His three purchases in August have totaled 68,532 shares, for which he paid $7.35 million.
Chambers is hardly the only bull on this stock. RBC Capital analyst Brian Abrahams also sees an upbeat picture here, based particularly on the Elevidys launch and the high potential for success in the EMBARK trial.
“Positive early signals from the Elevidys launch reaffirm in our view the potential for more rapid than expected uptake once access/ logistical hurdles ease into next year, and the company’s newly-conveyed statistical assumptions align with our work and further our confidence EMBARK has a high likelihood of success. We think shares continue to well underappreciate the potential for significant, multi-$B near-term revenue in all but the most bearish ph.III outcome scenarios, and we see a very compelling reward/risk setup and buying opportunity,” Abrahams opined.
Looking ahead, Abrahams gives SRPT shares an Outperform (i.e. Buy) rating with a $223 price target that implies a robust one-year gain of 87%. (To watch Abrahams’ track record, click here)
Overall, there are 17 recent analyst reviews on file for Sarepta, and they include 14 Buys and 3 Holds to support the stock’s Strong Buy consensus rating. The shares are selling for $119 and their $182.71 average price target indicates potential for 53.5% upside on the one-year horizon. (See SRPT stock forecast)
Evolus, Inc. (EOLS)
Next up is Evolus, a dermatological biotech firm billing itself as a ‘performance beauty’ company. Evolus boasts a flagship product on the market – a proprietary neurotoxin named Jeuveau, designed to smooth out and eliminate frown lines that can appear between the eyebrows. Smoothing away these glabellar lines results in a more youthful appearance, and the Jeuveau product has put Evolus on the map in the aesthetic neurotoxin market.
Jeuveau stands as the sole neurotoxin product dedicated solely to aesthetic treatment. Since its launch in 2019, it has emerged as the fastest-growing neurotoxin dermatological drug. Jeuveau is a fast-acting and long-lasting formulation, with results appearing in as short a time as two days and lasting for as long as 4 months.
A few basic numbers will show the potential of Jeuveau for Evolus. The global medical aesthetics market is valued at approximately $19 billion, with almost half stemming from aesthetic neurotoxins and dermal fillers – Evolus’ niche. The company’s target market, women of the ‘Millennial’ cohort or younger, is estimated at 53 million strong, and is an underpenetrated market. With a 10% annual growth expected in this TAM through 2028, Evolus has plenty of opportunity here for expansion.
For now, Evolus is showing a generally upward trend in revenues. In the company’s last financial release, for 2Q23, Evolus reported a top line of $49.3 million, up 32% year-over-year and beating the forecast by $196,000. At the bottom line, however, Evolus had a net loss per share of 32 cents. This was a 10-cent per share improvement from the prior-year period, but missed the estimates by a penny. Of more significance for investors, Evolus raised its full-year revenue guidance to the range of $185 million to $195 million (from $180 to $190 million).
The latest informative buy from an insider was made by Chairman of the Board Vikram Malik, who picked up 174,967 EOLS shares earlier this month, spending ~$1.29 million. He now holds more than $2.61 million worth of the company stock.
Cantor analyst Louise Chen is also taking a bullish stance on Evolus. She writes of the company: “We believe Jeuveau’s/Nuceiva’s value-proposition is under-appreciated and that the products can pick up meaningful share in what we view as a fast-growing and highly under-penetrated market. We estimate ~10% penetration now, and believe it could be 30-40% over time. Therefore, we believe U.S. and international launches of Jeuveau/Nuceiva, as well as the addition of new products such as Evolysse to the company’s product portfolio, should drive EOLS’s stock higher.”
In line with these comments, Chen rates EOLS an Overweight (i.e. Buy), and her $20 price target indicates her confidence in a strong 120% one-year upside potential for the stock. (To watch Chen’s track record, click here)
Overall, Evolus gets a Strong Buy from the Street’s analyst consensus, a view supported by 6 recent reviews that include 5 Buys against just 1 Hold. The shares are trading for $9.06 and the $19.83 average price target implies ~119% upside from current levels. (See EOLS stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.