Azek (NYSE: AZEK)
, Inari Medical (NASDAQ: NARI)
and 1Life Healthcare (NASDAQ:ONEM)
are examples of young companies boasting solid gains since their 2020 IPOs.
Newly public companies tend to be among the market’s biggest gainers. However, don’t worry that you have to compete with big institutions and insiders to grab shares when a company first goes public; you have plenty of time to get in early and still enjoy price appreciation.
Companies often zoom higher within a few years of an IPO. There are some good reasons for that. These companies are often more nimble than more mature firms, have a product or service that’s in high demand, and have managers who are motivated to grow fast.
After a stock’s public debut, it will often show an immediate pop. After that, it’s not unusual to see a correction, either after an initial rally of a few days or weeks, or perhaps immediately. But individual investors may find it’s best to wait out this initial pullback and wait for the stock to emerge from a constructive chart pattern before buying.
AZEK is at the intersection of two current trends: Recycling and the housing boom. The Chicago-based company uses recycled wood and plastic waste to manufacture products used in commercial and residential building and remodeling.
In March, the company said it would begin construction on a new facility in Boise, Idaho.
AZEK went public in June 2020, pricing its shares at $23, above its initially forecast range of $19 to $21. That’s an indication of high demand. Shares rallied to a high of $42.16 in August, then formed a consolidation which it cleared in January in light turnover.
It pulled back one more time, but trading volume picked up as the stock rallied to a February high of $48.79. It’s now consolidating again in muted trading volume, and may offer a new buy point above that prior high.
Earnings growth accelerated over the past five years, with analysts expecting earnings per share of $0.85 this year, which would be a 31% increase. Revenue growth accelerated over the past two quarters, to $212.3 million.
Inari Medical hopes its products will replace expensive drugs used to treat blood clots. The company’s devices can replace more expensive, and potentially more dangerous, medications from other manufacturers.
The Irvine, California company went public in May 2020 and gradually rallied to a high of $84.91 in August. From there, it formed its first consolidation, clearing that buy point in heavy volume on December 28.
The stock is now consolidating below its March 11 high of $127.42.
Inari gapped up on March 10 after its quarterly and yearly report. Annual earnings per share came in at $0.26 per share, topping analysts’ estimates. Revenue was $111 million, below forecasts, although fourth-quarter revenue of $48.6 million was up 111% from the year earlier.
The company said it expects revenue to increase 65% in 2021. Analysts expect earnings of $0.21 per share this year, which would be a 19% decrease. However, that consensus estimate was revised higher recently.
Revenue grew at triple-digit rates in each of the past eight quarters.
1Life Healthcare is another newly public company from the medical-sector. The company went public in January 2020 and behaved in typical post-IPO fashion, forming a consolidation within weeks.
It’s currently forming a steep consolidation below its February 16 high of $59.82. So far, the stock is finding support above its 200-day moving average. That is often a sign that institutional investors are buying shares at a lower price to add to their current positions.
The company provides subscription-based medical services, allowing customers to book doctor appointments, Covid tests, lab tests, as well as order prescriptions. It came under fire from Congressional regulators in early March, amid accusations that it allowed wealthier customers to cut to the front of lines for Covid vaccinations.
The company is yet to show profitability, as is not unusual with newly public firms. Revenue grew 57% in the most recent quarter, to $121.8 million. Revenue grew at double-digit rates in each of the past eight quarters.
Analysts expect a loss of $0.55 per share this year, narrowed from last year’s loss of $0.71 per share.
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