When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.
Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. That said, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the outlook is warranted.
Two Stocks to Sell:
SiteOne (SITE)
Consensus Price Target: $153.90 (6.9% implied return)
Known for distributing John Deere tractors and LESCO turf care products, SiteOne Landscape Supply (NYSE: SITE) provides landscaping products and services to professionals, including irrigation, lighting, and nursery supplies.
Why Does SITE Fall Short?
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 12.2% annually
- Eroding returns on capital suggest its historical profit centers are aging
SiteOne’s stock price of $143.91 implies a valuation ratio of 34.8x forward P/E. If you’re considering SITE for your portfolio, see our FREE research report to learn more.
Corning (GLW)
Consensus Price Target: $68.25 (1.8% implied return)
Supplying windows for some of the United States’s earliest spacecraft, Corning (NYSE: GLW) provides glass and other electronic components for the consumer electronics, telecommunications, automotive, and healthcare industries.
Why Is GLW Not Exciting?
- Annual sales growth of 4% over the last two years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- 4.1 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
- Underwhelming 5.9% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its decreasing returns suggest its historical profit centers are aging
At $67.04 per share, Corning trades at 26.7x forward P/E. Dive into our free research report to see why there are better opportunities than GLW.
One Stock to Watch:
Hamilton Insurance Group (HG)
Consensus Price Target: $25.43 (8.6% implied return)
Founded in 2013 and operating through three distinct underwriting platforms across four countries, Hamilton Insurance Group (NYSE: HG) operates global specialty insurance and reinsurance platforms across Lloyd's, Ireland, Bermuda, and the United States.
Why Does HG Stand Out?
- Market share has increased this cycle as its 49.7% annual revenue growth over the last two years was exceptional
- Strong 26% annualized net premiums earned expansion over the last two years shows it’s capturing market share this cycle
- Pre-tax profits increased over the last two years as the company gained some leverage on its fixed costs and became more efficient
Hamilton Insurance Group is trading at $23.42 per share, or 0.9x forward P/B. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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