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. Keeping that in mind, here is one stock where you should be greedy instead of fearful and two facing legitimate challenges.
Two Stocks to Sell:
Torrid (CURV)
Consensus Price Target: $1.58 (-22.9% implied return)
Promoting a message of body positivity and inclusiveness, Torrid Holdings (NYSE: CURV) is a plus-size women’s apparel and accessories retailer.
Why Are We Out on CURV?
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Capital intensity has ramped up over the last year as its free cash flow margin decreased by 7.9 percentage points
- Depletion of cash reserves could lead to a fundraising event that triggers shareholder dilution
Torrid is trading at $2.05 per share, or 8.2x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including CURV in your portfolio.
Aramark (ARMK)
Consensus Price Target: $47.16 (10% implied return)
From serving hot dogs at major league stadiums to managing college dining halls that feed thousands daily, Aramark (NYSE: ARMK) provides food services and facilities management to schools, healthcare facilities, businesses, sports venues, and correctional institutions across 16 countries.
Why Is ARMK Not Exciting?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Earnings per share have contracted by 29.5% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Lacking free cash flow generation means it has few chances to reinvest for growth, repurchase shares, or distribute capital
At $42.86 per share, Aramark trades at 18.8x forward P/E. If you’re considering ARMK for your portfolio, see our FREE research report to learn more.
One Stock to Watch:
Standex (SXI)
Consensus Price Target: $276.80 (3.1% implied return)
Holding over 500 patents globally, Standex (NYSE: SXI) is a manufacturer and distributor of industrial components for various sectors.
Why Are We Fans of SXI?
- Superior product capabilities and pricing power lead to a premier gross margin of 38.8%
- Disciplined cost controls and effective management resulted in a strong long-term operating margin of 15%, and its operating leverage amplified its profits over the last five years
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 18.1% exceeded its revenue gains over the last five years
Standex’s stock price of $268.37 implies a valuation ratio of 28.6x forward P/E. Is now the time to initiate a position? See for yourself in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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