After the sell-off in February, the markets have sprung back up. The broader S&P 500 Index is trading at an all-time high and the blue-chip Dow Jones Industrial Index is just shy of its all-time peak.
The tech-heavy Nasdaq Composite Index, however, has yet to break above its record high reached ahead of the February sell-off. Most stocks have taken off, although a few are still languishing at their lowest levels for the year or just off of them.
The premise of choosing fundamentally sound stocks trading at depressed levels is that they will eventually generate strong returns when the tide turns. But, not all beaten-down stocks are worth putting one's money into.
Here are three stocks that could be bargain buys, while at the same time promising strong upside to current levels.
Lucira Health Inc LHDX: Shares of this company that made a recent Wall Street debut have not been able to sustain the momentum it picked up in the early days of its listing.
Lucira is a developer of at-home molecular diagnostic tests that has the advantages of accuracy and convenience. The testing platform, the company claims, produces centralized-laboratory-accurate molecular testing in a single-use and consumer-friendly test kit powered by two AA batteries and fits in the palm of a hand.
The company's products aim to overcome the obstacles associated with the current disease testing infrastructure, such as higher costs, lack of accuracy and inaccessibility owing to slow time to results or complexity.
Lucira emerged as a COVID-19 pandemic play with the FDA's emergency use authorization for its COVID-19 all-in-one, single-use test kit. Lucira was the first to be given the authorization for an at-home test.
The recent weakness in shares may be traced back to FDA authorizations granted for at-home tests from Abbott Laboratories ABT and Quidel Corporation QDEL.
The resurgence of COVID-19 suggests the company has further wiggle room to grow. And, the company can more than be a COVID-19 play, as ahead of the pandemic it was focused on developing an over-the-counter flu test.
Lucira shares are trading well off its IPO price of $17 and near its 52-week low. The average analysts' price target for the shares is $25.50.
LHDX Price Action: Shares of Lucira were advancing 6.37% to $8.99 on Friday morning.
Related Link: 3 Biotech Stocks That Could Double In 12 Months
Vertex Inc VERX: This Pennsylvania-based tax compliance software and services company saw its stock peak at $39.71 on Feb. 19.
The company went public in July 2020 by offering 21.15 million Class A shares at a price of $19. Following a strong debut, it was mostly consolidating until the final quarter of the year.
Vertex shares broke above the trading range in early December and the momentum continued into the new year. The market-wide tech sell-off proved to be the undoing for the shares.
Soft guidance issued by the company for the fiscal year 2021 and churn numbers exerted further pressure on the stock, which is currently under its previous 52-week low.
Needham analyst Joshua Reilly has a Buy rating on Vertex shares and a $30 price target.
"We believe several factors support Vertex's competitive position and growing share of the $7B+ Tax Compliance software market in the U.S.," Reilly said in a note.
Among the positive factors are 4,000+ customers, on-premise support, Cloud or hybrid deployments, a broad set of integrations at scale and continual updates to its tax content database for rule changes, he added.
Competition, especially from Avalara Inc AVLR, is seen as a headwind by Morgan Stanley.
VERX Price Action: Shares of Vertex were down 3.41% to $19.39 on Friday morning.
Perdoceo Education Corp PRDO: This Illinois-based company, which previously went by the name Career Education Corp, is a provider of postsecondary education that is primarily online, but also has campus-based and blended learning programs.
The company reported 9.5% year-over-year revenue growth for the fiscal year 2020 to $687.3 million, and its adjusted earnings per share climbed from $1.37 to $1.56.
Demand for online education continues to remain strong amid the ongoing pandemic. The company has also exercised financial discipline, with expanding margins and a fairly robust cash position.
Valuation appears cheap, given the stock is trading at a forward P/E ratio of 6.78. The stock is currently near long-term support.
The average analysts' price target for Perdoceo Education's shares is $23.33, with the Street-high price target at $27.
PRDO Price Action: Shares of Perdoceo were down 0.42% at $11.91 on Friday morning.
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