When investors think of healthcare plays, they usually think of defensive dividend-paying stocks.
A high P/E and large growth prospects are usually reserved for sectors like technology – but for one healthcare company, growth and a niche business makes for a potential breakout stock pick.
Is National Vision Holdings (EYE) a buy, sell, or hold? Is this stock in a bullish trend or about to collapse?
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Investors can take advantage of this company’s ability to provide high growth as well as a defensive business to achieve gains at a much lower risk than other growth stocks in the market.
An Amalgamated Healthcare Giant with Lion’s Share of the Market
National Vision Holdings (EYE) is a $2.3 billion niche healthcare company that specializes in eye care and other vision-related needs. Under the company umbrella are recognizable brands such as America’s Best Contacts and Eyeglasses, Eyeglass World, and Vision Center in Wal-mart locations.
The company reported a slight miss for the second quarter at $0.20 per share compared to analysts’ estimates of $0.21 per share. However, revenues rose 11.4% year-over-year to $429.5 million.
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The stock was upgraded by Loop Capital earlier this month from a “hold” to “buy” recommendation along with a price target range of $30 to $37 per share, following behind Goldman’s “buy” recommendation last month.
Catalysts for National Vision include minimal exposure to tariffs, a defensive recession-proof business, and a model that allows for a plethora of new store openings and increased same-store sales numbers.
Fundamental Analysis of EYE
The stock trades at around 40 times earnings making it a growth stock rather than a value stock – not usually what investors think of in a healthcare play.
Impressively, the stock also comes with a relatively low price-to-book ratio of 2.70. This indicates that the company is still growing into its full value.
Unlike most healthcare plays, National Vision’s stock doesn’t come with a dividend, sacrificing income disbursement for investments in new store openings and acquisitions.
Technical Analysis of EYE
A look at the stock chart seems to indicate a few mixed signals.
While the 20-day SMA is still currently trading above the longer 90-day SMA, a sign of bullish momentum, the lines are close to crossing over. However, the recent dip has taken place on lower-than-average volume which could allow investors to buy while the stock is in a lull.
The Bottom Line
Based on National Vision’s full-year EPS estimates, this stock should be fairly valued at around $36 per share – a staggering gain of about 33% from its current trading range.
If you’re looking for a dichotomous play that combines both defense and growth, look no further than National Vision Holdings.
The above analysis of EYE was provided by Daniel Cross, professional trader and financial writer.
What Does MarketClub Say?
As Mr. Cross said, the signals are a bit mixed for EYE. With a chart analysis score of -65, price action is choppy and a firm trend has yet to be established.
This can change quickly. Be the first to know when EYE move into a real trend.
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