3. Eresearch Technologies (ERT)I profiled this company 18 months ago after it had just made a major acquisition. During that time the provider of outsourced drug-testing services looked poised for robust growth. Back then, I suggested EPS could exceed $0.50 in 2011 and perhaps $0.60 in 2012. Well, I was being too ambitious.
Company-wide gross margins have slumped, and the company has been slow to generate expected synergies from that 2010 acquisition (it bought the research division CareFusion (CFN), in an $81 million deal). As a result, shares have fallen from $8 back then to a recent $5.It now looks as if my analysis was actually accurate, albeit premature. Recent quarterly results, highlighted by a swelling backlog of a record $343 million, set the stage for an improvement in results in 2012. "FY12 is shaping up to potentially be a double-digit revenue growth year," predict analysts at Auriga Securities. They see EPS (finally) exceeding 50 cents next year and figure if the company can hit this mark, then shares could rise up to $9, more than 75% above current levels. Analysts at Dougherty & Co., however, have a more modest $7.50 price target, noting that the stock "is trading at a no-growth multiple though we expect the company to grow revenue at least in the mid single-digit percentage next year." Still, this would be nearly a 50% gain from current levels. Risks to Consider: The health care sector is currently in flux. Any major reimbursement changes, either from the government or health maintenance organizations, could hamper these companies' ability to meet 2012 sales and profit targets. Action to Take These three companies share one common trait: the past year has not played out as many had expected when the year began. But each of these companies, all of which have seen their stock fall steadily from a 52-week high, look to have at least 50% upside, and are poised for solid annual results in 2012 and beyond. Disclosure: Neither D. Sterman nor StreetAuthority, LLC hold positions in any securities mentioned in this article.
More From StreetAuthority:
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV