3 Small and Mid-Cap Revenue Growers Investors Should Know About
These companies executed the 'analyst two-step' well, beating first-quarter revenue expectations.
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We are in the midst of first-quarter earnings season. This means the quarterly ritual I call the "analyst two-step" is in full effect as companies step over tepid expectations while delivering their results.
This trend is stronger than usual this quarter. More than 75% of S&P 500 companies reporting results so far have beaten earnings estimates. They aren’t doing nearly as well on the revenue side of things, though, as just over 60% of S&P companies have had a beat on the top line. This is not surprising given earnings per share are easier to manipulate than revenues, which is why GAAP and non-GAAP earnings exist in the first place.
Today we are going to look at a few names that have delivered more than solid revenue growth this quarter and should be on investors’ radars.
Let’s start with Lantheus Holdings LNTH. The radiopharmaceutical concern reported stellar Q1 results to kick off May. The company easily beat the bottom-line consensus and revenues grew 23% on a year-over-year basis to $370 million, some $20 million above expectations. Sales from the company’s flagship PYLARIFY rose over 32% from the same period a year ago.
I already have a fairly large covered call position in Lantheus, but I am still a buyer on any future weakness. Even after a nice boost following quarterly results, the stock is still on the cheap side, trading at 12 times trailing earnings.
Hims & Hers Health HIMS also reported a very solid first quarter on Monday. Revenues were up better than 45% from a year earlier and the company easily beat bottom-line expectations as well, swinging from a net loss of $10.1 million in the year-ago quarter to a net profit of a bit over $11 million. The telehealth/retail company is mostly known for its weight loss and ED products whose ads are all over cable television. Subscription growth was also up an impressive 41% from the same period a year ago.
The only caveat I have right now with HIMS is that its CEO late last week made an unforced error supporting the protestors across so many college campuses. He quickly walked back much of those comments by Monday this week, but I would probably wait a few weeks to make sure this blows over in the news cycle before taking a stake in this stock.
Lastly, we have Performant Financial PFMT, a provider of healthcare payment integrity services, which posted Q1 numbers after the bell on Tuesday. This small-cap company beat both top and bottom-line expectations. Revenues rose just over 6% on a year-over-year basis which was significantly better than the flat sales growth projected. More importantly, its core healthcare business saw revenues rise 13% over Q1 2023.
Performant's management also reaffirmed full-year revenue and profitability guidance. The stock should get a bit of a boost in trading Wednesday.
At the time of publication, Jensen was long LNTH and PFMT.
