Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here is one stock poised to prove Wall Street wrong and two where the outlook is warranted.
Two Stocks to Sell:
BOK Financial (BOKF)
Consensus Price Target: $144 (6.2% implied return)
Tracing its roots back to 1910 when Oklahoma was still a young state, BOK Financial (NASDAQ: BOKF) is a regional bank holding company that provides commercial banking, consumer banking, and wealth management services across eight states in the central and southwestern US.
Why Does BOKF Fall Short?
- 2.5% annual revenue growth over the last five years was slower than its banking peers
- Net interest income trends were unexciting over the last five years as its 3.7% annual growth was below the typical banking firm
- Net interest margin of 2.8% is well below other banks, signaling its loans aren’t very profitable
At $135.54 per share, BOK Financial trades at 1.3x forward P/B. To fully understand why you should be careful with BOKF, check out our full research report (it’s free).
Capital Southwest (CSWC)
Consensus Price Target: $24.80 (2.6% implied return)
Originally founded in 1961 as a venture capital investor that helped launch Texas Instruments, Capital Southwest (NASDAQ: CSWC) is a business development company that provides debt and equity financing to middle-market companies primarily in the United States.
Why Does CSWC Give Us Pause?
- Performance over the past two years shows its incremental sales were much less profitable, as its earnings per share fell by 6.7% annually
- 9× net-debt-to-EBITDA ratio shows it’s overleveraged and increases the probability of shareholder dilution if things turn unexpectedly
Capital Southwest’s stock price of $24.17 implies a valuation ratio of 10.6x forward P/E. Check out our free in-depth research report to learn more about why CSWC doesn’t pass our bar.
One Stock to Buy:
Northwest Pipe (NWPX)
Consensus Price Target: $99 (-10.1% implied return)
Playing a large role in the Integrated Pipeline (IPL) project in Texas to deliver ~350 million gallons of water per day, Northwest Pipe (NASDAQ: NWPX) is a manufacturer of pipeline systems for water infrastructure.
Why Will NWPX Beat the Market?
- Annual revenue growth of 13.6% over the last five years was superb and indicates its market share increased during this cycle
- Performance over the past two years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Free cash flow margin grew by 18.3 percentage points over the last five years, giving the company more chips to play with
Northwest Pipe is trading at $110.07 per share, or 22.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
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