Equity market benchmarks ended their record rally yesterday, with the S&P 500 and the Dow declining by 0.8% and 0.7%, respectively, due to a 6.2% annual rise in the Consumer Price Index (CPI). Nonetheless, the United States is recovering faster than expected, driven by favorable policies. The labor market is getting back on track as evidenced by reported gains in broad-based payroll numbers. Furthermore, the unemployment rate declined  to 4.6%, with non-farm payrolls increasing by 531,000 last month.

Despite a push for interest rate hikes, the Fed intends to be patient. Meanwhile, the U.S. Congress passed the $1 trillion infrastructure bill last week  and plans to work on a broader social spending bill next. This is expected to boost the overall U.S economy even more.

Given the solid economic backdrop, we think under-the-radar stocks Heidrick & Struggles International, Inc. (HSII) and Natus Medical Incorporated (NTUS) could be solid bets now.

Heidrick & Struggles International, Inc. (HSII)

Chicago-based HSII provides consulting and executive search services to businesses and business leaders globally. The company facilitates the recruitment and management of senior executives, offering its services to major U.S. and foreign companies.

On September 28, HSII announced a partnership with AI-driven talent development platform creator Eightfold AI to develop a digital leadership platform. Regarding this partnership, Krishnan Rajagopalan, President and CEO, Heidrick & Struggles, said, "We are excited about our partnership with Eightfold AI, a leader in AI-driven talent solutions. Together, we believe we can offer organizations a new way to make faster, smarter leadership decisions across key areas–from hiring needs and mobility to succession planning–at scale.”

For its fiscal third quarter, ended September 30, HSII’s total revenue increased 83.6% year-over-year to $265.32 million. Its operating income improved 187.2% from the prior-year quarter to $33.34 million. Its net income and EPS came in at $24.50 million and $1.21, respectively, up substantially from their negative year-ago values.

A $0.79 consensus EPS estimate for the current quarter (ending December 2021) indicates a 33.9% year-over-year increase. And the $260.73 million consensus revenue estimate for the current  quarter reflects a 62%improvement from the prior-year quarter. Furthermore, HSII has an impressive surprise earnings history; it has topped consensus EPS estimates for each of the trailing four quarters.

The stock has gained 75.7% in price over the past year and 58.9% year-to-date to close yesterday’s trading session at $46.69.

HSII’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

HSII has a Growth and Value grade of A, and a Sentiment and Quality grade of B. In the 18-stock, A-rated Outsourcing – Staffing Services industry, it is ranked #1. Click here to see the additional POWR Ratings for HSII (Momentum and Stability).

Natus Medical Incorporated (NTUS)

NTUS is a global medical device solutions provider focused on diagnosing and treating central nervous and sensory system disorders. The Pleasanton, Calif.-based company offers products and services used to detect and treat medical problems related to newborn care, epilepsy, sleep disorders, and hearing impairment.

On September 27, NTUS announced that the company had been awarded a five-year contract to act as a preferred purchasing source for the United States government healthcare systems. The contract, which includes a five-year extension option, is expected to boost the company’s operations, and generate substantial returns.

In August, NTUS announced the first successfully performed clinical case of its product used in monitoring and stimulating electric signals on the brain’s surface. The new product might provide care teams with greater efficiency and performance.

NTUS’ revenue increased 10.8% year-over-year to $113.88 million in its  third fiscal quarter, ended September 30. Its non-GAAP operating income rose 191.4% from the same period last year to $13.55 million. Its non-GAAP net income and non-GAAP EPS improved 192% and 211.1%, respectively, from the prior-year quarter to $9.33 million and $0.28.

The Street expects its EPS to increase 12.8% year-over-year to $0.44 for the current quarter (ending December 2021). The Street’s  $123.50 million revenue estimate for the current year  indicates a 4% rise from the prior year.

NTUS’ stock has gained 27.1% over the past year and 32% year-to-date to close yesterday’s trading session at $26.46.

It is no surprise that NTUS has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock has an A grade for Growth and Value, and a B grade for Quality. It is ranked #3 out of the 173 stocks in the Medical – Devices & Equipment industry.

To see the additional POWR Ratings for Momentum, Stability, and Sentiment for NTUS, click here.

Click here to checkout our Healthcare Sector Report for 2021

HSII shares were trading at $46.98 per share on Thursday afternoon, up $0.29 (+0.62%). Year-to-date, HSII has gained 62.24%, versus a 25.26% rise in the benchmark S&P 500 index during the same period.

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.

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