Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.
Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. That said, here is one stock where Wall Street’s excitement appears well-founded and two where its enthusiasm might be excessive.
Two Stocks to Sell:
Rush Enterprises (RUSHA)
Consensus Price Target: $78.67 (19.9% implied return)
Headquartered in Texas, Rush Enterprises (NASDAQ: RUSH.A) provides truck-related services and solutions, including sales, leasing, parts, and maintenance for commercial vehicles.
Why Do We Steer Clear of RUSHA?
- Sales tumbled by 3.1% annually over the last two years, showing market trends are working against its favor during this cycle
- Gross margin of 20.3% reflects its high production costs
- Earnings per share have dipped by 11.1% annually over the past two years, which is concerning because stock prices follow EPS over the long term
Rush Enterprises is trading at $65.59 per share, or 17.3x forward P/E. Dive into our free research report to see why there are better opportunities than RUSHA.
Sherwin-Williams (SHW)
Consensus Price Target: $387.48 (23.4% implied return)
Widely known for its success in the paint industry, Sherwin-Williams (NYSE: SHW) is a manufacturer of paints, coatings, and related products.
Why Does SHW Give Us Pause?
- The company has faced growth challenges as its 1.1% annual revenue increases over the last two years fell short of other industrials companies
- Projected sales growth of 4.2% for the next 12 months suggests sluggish demand
- Earnings growth underperformed the sector average over the last two years as its EPS grew by just 5.2% annually
At $314.11 per share, Sherwin-Williams trades at 25.5x forward P/E. Check out our free in-depth research report to learn more about why SHW doesn’t pass our bar.
One Stock to Buy:
JFrog (FROG)
Consensus Price Target: $69.65 (60.1% implied return)
Named after the amphibian that continuously evolves from egg to tadpole to adult, JFrog (NASDAQ: FROG) provides a platform that helps organizations securely create, store, manage, and distribute software packages across any system.
Why Is FROG a Good Business?
- Ability to secure long-term commitments with customers is evident in its 23.6% ARR growth over the last year
- User-friendly software enables clients to ramp up spending quickly, leading to the speedy recovery of customer acquisition costs
- Robust free cash flow margin of 26.8% gives it many options for capital deployment
JFrog’s stock price of $43.50 implies a valuation ratio of 8x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
High-Quality Stocks for All Market Conditions
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