June 17, 2022- Charles River Laboratories International, Inc. (NYSE:CRL) and Ecolab Inc. (NYSE:ECL)
Mounting catalysts have these two stocks looking like the best stocks to buy now.
The reality of rate hikes and a pending recession set in on Thursday (June 16, 2022). The Dow plummeted over 700 points or 2.4% and fell below its key 30,000 level. Additionally, all S&P sectors were red, leading the S&P 500 down 3.2%, while the Nasdaq dropped deeper into its bear market, falling 4.1%. Yet, the harder stocks fall, the better they look to buy. Lost in the carnage were several bullish catalysts making Charles River Laboratories International, Inc. (NYSE:CRL) and Ecolab Inc. (NYSE:ECL) two of the best stocks to buy now.
Charles River is a prominent player in the life sciences tools and services industry. This week, it announced plans with ASC Therapeutics to produce a second-generation gene therapy for hemophilia A. Already the program has received IND clearance and crossed other regulatory hurdles in the United States and Europe.
CRL isn’t just some speculative biotech play. The Company has rock-solid fundamentals, a decade’s worth of gargantuan returns, and an analyst upside of over 60%. It’s currently trading near oversold territory and around 52-week lows too.
Secondly, there’s water purification company Ecolab, which is a perfect way to play record-setting droughts and heatwaves. Moreover, with Europe continuing its struggle to wean itself off of Russian fossil fuels, ECL’s recently revealed plans to build a wind farm on Finland’s west coast could be game-changing.
Perhaps that’s why UBS and Credit Suisse upgraded their ECL coverage and hiked their price targets two weeks ago.
We’re not naive. The market is rough right now. But these catalysts only scratch the surface as to why Charles River Labs and Ecolab are two of the best stocks to buy now.
Charles River Laboratories International, Inc. (NYSE:CRL)
This just-announced hemophilia A project has this STRONG BUY biotech stalwart staring at a 63.69% upside.
Many investors are avoiding biotech stocks like the plague. However, CRL stands above the pack.
This isn’t some sort of speculative stock that hopes its one or two clinical trials work out.
This is a pharma behemoth that had some role in developing roughly 85% of FDA-approved drugs as of four years ago. Moreover, it boasts a sticky customer-base that consists of leading worldwide pharmaceutical, biotechnology, agrochemical, government, and academic organizations
We’re talking about one of the best stocks to buy now. As in today.
The stock has seen a considerable return over the last decade. But finally, it’s trading at a rare, mouth-watering discount over 55% below its record high.
With new drivers and strong fundamentals, it probably won’t stay this cheap for long.
What recent catalysts could help CLR breakout?
This week, Charles River Laboratories finalized an agreement with ASC Therapeutics. Together, they will manufacture ASC618, a second-generation gene therapy for hemophilia A. Better, the ASC618 program has already received IND clearance and crossed other key regulatory hurdles in the United States and Europe.
This collaboration could leverage Charles River’s end-to-end contract development and manufacturing organization (CDMO) capabilities. Furthermore, it could disrupt a global gene therapy with a 27.8% CAGR through 2024.
Beyond this recent development, in April, CRL and Valo Health, Inc launched Logica, an artificial intelligence-powered drug solution. Additionally, that same month, CRL acquired San Diego, CA-based contract vivarium research firm ExploraBioLabs Holdings, Inc.
CLR’s recent earnings beat and strong margins, could set it up for success.
On May 4, 2021, Charles River Laboratories reported Q1 Earnings that slightly beat both top and bottom lines. Revenue came in at $913.9 million versus the consensus estimate of $910.1 million, and EPS came in at $2.75, beating analyst estimates by $0.03.
Additionally, Charles River Laboratories’ FY2022 guidance sees revenue growing 13.5% – 15.5%.
However, this could be conservative. Finbox data reveals that CRL’s revenue could see a 16.1% 5-year CAGR, with net income growing 52.9% while averaging 22.5% over the next five fiscal years.
Moreover, even if CRL doesn’t reach these lofty projections, it has plenty of solid margins speaking to how well-run the Company is, including its
CRL trades at a deep discount.
The best stocks to buy now are always ones on sale. CRL certainly fits this bill.
We mentioned earlier that CRL is over 55% below its all-time highs. But do a deeper dive into the stock, and its discount looks even more mouth-watering.
First, the stock is just about $2 above its 52-week lows. Its 34.41 14-day RSI is also nearly oversold, while its 17.8x forward P/E indicates the stock could be undervalued.
Second, with projected growth figures and fundamentals like those discussed earlier, it’s hard to foresee CRL trading at a bargain for much longer.
That’s why analysts largely see CRL as a STRONG BUY.
Need more evidence why CRL is one of the best stocks to buy now? Talk to some analysts. Since April, several have either maintained or initiated bullish coverage on CRL. Morgan Stanley, Keybanc, and Wells Fargo all maintained an OVERWEIGHT rating, while Stephens & Co. began OVERWEIGHT coverage.
Additionally, 12 Wall Street analysts in total, over the last 3 months, offered a 12-month price target for CRL. Of this 12, 10 rated it a BUY, compared to just 2 HOLD and 0 SELL. That’s why TipRanks scores this stock a STRONG BUY. It currently has a high price target of $385.00, a low of $280.00, and an average price of $335.73, representing a 63.69% upside from June 16, 2022’s $205.10 closing price.
CRL’s year-to-date low and high are $203.37 and $379.65, respectively.
Ecolab Inc. (NYSE:ECL)
This water purification company looks like a scorching summer pick with a 35.41% upside due to brutal heat waves and Europe’s renewable energy demand.
The United States is currently dealing with record droughts and unprecedented heat waves. While the west coast is no stranger to these climate occurrences, this week, the south and midwest are feeling the brunt. A dreaded heat wave in Kansas killed thousands upon thousands of cattle. This weekend, millions in the south are expected to confront a ‘dangerous situation‘ with triple-digit temperatures.
In total, 65 million people from California to Tennessee face some sort of imminent heat advisory.
Ecolab is one of the best stocks to buy now as a potential remedy.
Ecolab, a prominent chemical industry player. While water and hygiene is its foundation, it also provides infection prevention solutions and services throughout the world.
It’s in a prime spot to see its stock scorch like this weather over the next few weeks. But it could solve critical energy problems in Europe. The Company recently unveiled plans to build a wind farm on the western coast of Finland. This farm is expected to bring Ecolab’s sustainable energy to 100% in Europe.
Ecolab’s deeply oversold; its growth catalysts point to a strong second half of 2022.
Ecolab’s deep discount makes it one of the best stocks to buy now. Consider its 0.29 PEG ratio, 30.42 oversold 14-day RSI and positioning -38.65% below its 2022 highs.
The discount is mind-blowing when you look at its growth catalysts.
Climate change isn’t going anywhere, and neither will heat waves. The following metrics have all increased over the last five decades.
- Frequency of heat waves per year
- Duration of heat waves
- Heat wave season length
- Intensity of heat waves relative to local weather
Sadly, the war in Ukraine will not end anytime soon, and Europe is on pace to run out of gas by wintertime. As it scrambles to find alternative energy sources, Ecolab’s Finland windfarm couldn’t come at a more opportune time.
Ecolab’s latest earnings didn’t set the world on fire, but they still were mainly in line with estimates. Most importantly, the Company had some bullish comments on its growth potential during the year’s second half.
ECL acknowledged inflation’s headwinds but remarked on several pricing initiatives that could set it up for success. It is rolling out structural pricing in the 6% to 7% range for the year’s balance and a worldwide temporary energy surcharge of up to 12%.
It further mentioned that the rollout of its pricing actions should accelerate earnings growth through the second half. At the same time, it expects to deliver low-teens growth in adjusted diluted earnings per share for full-year 2022.
With these catalysts, Finbox data projects ECL’s net income to grow 30.0% and average 19.7% over the next five fiscal years.
ECL’s margins and dividends point to an efficiently run company.
You can paint a stronger fundamental case for this stock when considering its profitability and operating margins, like its 40.1% gross margin and 14.3% operating margin.
Its 16.6% ROCE also depicts a Company that’s generating a decent return from the book value of its equity.
Moreover, ECL offers investors a solid dividend. The Company’s dividend yield currently sits at 1.4%, but it’s projected to grow 6.3% and increase at a 6.6% 5-year CAGR.
Recent analyst upgrades point to a significant upside for Ecolab.
Ecolab is seeing some bullish analyst activity in June. On June 2, 2022, analysts from UBS upgraded their ECL coverage from NEUTRAL to BUY and increased their price target from $186.00 to $205.00. The next day, Credit Suisse hiked its rating from NEUTRAL to OUTPERFORM and increased its price target from $180.00 to $195.00.
In total, 15 Wall Street analysts offered 12-month price targets for Ecolab in the last 3 months. ECL’s average price target currently sits at $197.29, representing a 35.41% upside from June 16, 2022’s closing price of $145.63. The stock has a high forecast of $225.00 and a low of $169.00.
ECL’s year-to-date low and high are $143.82 and $237.38, respectively.