Investors looking for breakout stocks to buy that Wall Street already loves should find it easier now that the S&P 500 is near 52-week and all-time highs. The index is up nearly 12% year to date thanks to an almost 5% gain in the past month.
Doing a quick stock screen of stocks in the index within 95% of their 52-week high and for which at least five analysts rate its stock a Buy, I get 131 names, many of them with market capitalizations of $50 billion or higher.
When I think of breakout stocks, $50-billion market caps don’t come to mind. I’m thinking about smaller stocks. All 503 on the index have market caps over $2 billion. So, I’ve got to go lower, selecting names from the S&P Composite 1500, which is all three major U.S. S&P indexes.
Of the 1,500 names, I get 13 that meet the two criteria mentioned above and have a market cap of less than $5 billion.
Here are my three choices of breakout stocks to buy.
Boot Barn Holdings (BOOT)
Boot Barn Holdings (NYSE:BOOT) is up 54% over the past year and was recently trading at a new 52-week high of $115.97. It has a market cap of $3.3 billion and 12 of 14 analysts covering its stock rate it a Buy with a target price of $116, more than 3% higher than where it’s currently trading.
In February 2023, I recommended Boot Barn stock after it lost at least 5% in a single week. I reckoned that as its costs came down, its profits would rise. That’s not entirely what happened.
On May 14, the company reported its Q4 2024 results. Its sales rose 0.6% to $1.67 billion for the year, while its operating margin fell 200 basis points to 11.9%. In Q1 2025, it expects sales growth of 4.0% to 6.1%, with an operating margin another 200 basis points lower than in 2024.
So why do analysts like it? As far as I can tell, Boot Barn’s cash flow in 2024 increased by 166% to $236.1 million, a sign that its business is strengthening.
Essential Properties Realty Trust (EPRT)
Essential Properties Realty Trust (NYSE:EPRT) is up 10.7% over the past year and trading above 98% of its 52-week high of $27.70. It has a market cap of $4.8 billion and 11 of 13 analysts covering its stock rate it a Buy with a target price of $28.46, more than 4% higher than where it’s currently trading.
The REIT (real estate investment trust) buys single-tenant properties from middle-market companies operating service-oriented and experience-based businesses. It then leases them back to the businesses through sale-leaseback transactions.
As of March 31, 2024, it had 1,937 properties leased to 383 tenants operating in 16 industries across 48 states. The three states generating the highest ABR (average base rent) are Texas (13.1%), Georgia (8.0%), and Florida (5.9%).
The top 10 tenants account for just 18.1% of its rental revenue, with a high 99.9% occupancy rate. It spends approximately $3.2 million per investment property that it buys. The average lease term of its tenants is over 17 years.
The three top industries by revenue are car washes (15.1%), early childhood education (11.6%), and quick service restaurants (10.7%).
It pays a quarterly dividend of $0.285 per share, and the annual rate of $1.14 yields a healthy 4.2%.
Ashland (ASH)
Ashland (NYSE:ASH) is up 8.6% over the past year and trading at almost 99% of its 52-week high of $99.55. It has a market cap of $4.9 billion and 9 of 12 analysts covering its stock rate it a Buy with a target price of $110.00, 11.5% higher than where it’s currently trading.
Paul Blazer founded the company in 1924. It began its long history as the Ashland Refining Company in Catlettsburg, Kentucky. Blazer acquired a small refinery for $212,500.
Most investors are familiar with Ashland because of its former ownership of Valvoline (NYSE:VVV), the motor oil business it acquired in 1949.
It remained part of the company until September 2016, when Ashland spun off Valvoline in an IPO that sold 34.5 million shares to investors at $22 each. In April 2017, it completely separated Valvoline from Ashland. Shareholders got 2.73 shares of Valvoline stock for every Ashland share.
In March 2023, Valvoline sold its Global Products business to Saudi Aramco for $2.65 billion.
Ashland’s remaining businesses provide specialty additives and materials to several consumer and industrial markets, including architectural coatings, construction, energy, food and beverage, nutraceuticals, personal care and pharmaceuticals.
Based on last month’s analyst earnings estimate of $4.46 a share in fiscal 2024 (September year-end), it trades at 22.0x those earnings. That’s neither cheap nor expensive but fairly valued.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
