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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. Keeping that in mind, here is one stock where Wall Street’s excitement appears well-founded and two where analysts may be overlooking some important risks.
Two Stocks to Sell:
Utz (UTZ)
Consensus Price Target: $11.95 (70.9% implied return)
Tracing its roots back to 1921 when Bill and Salie Utz began making potato chips in their kitchen, Utz Brands (NYSE: UTZ) offers salty snacks such as potato chips, tortilla chips, pretzels, cheese snacks, and ready-to-eat popcorn, among others.
Why Do We Steer Clear of UTZ?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Smaller revenue base of $1.45 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
- Low returns on capital reflect management’s struggle to allocate funds effectively
Utz’s stock price of $6.99 implies a valuation ratio of 8.6x forward P/E. If you’re considering UTZ for your portfolio, see our FREE research report to learn more.
Whirlpool (WHR)
Consensus Price Target: $56.55 (42.5% implied return)
Credited with introducing the first automatic washing machine, Whirlpool (NYSE: WHR) is a manufacturer of a variety of home appliances.
Why Is WHR Risky?
- Sales tumbled by 5.8% annually over the last five years, showing market trends are working against it during this cycle
- 5.4 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
- 7× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $39.67 per share, Whirlpool trades at 10.9x forward P/E. To fully understand why you should be careful with WHR, check out our full research report (it’s free).
One Stock to Watch:
The Ensign Group (ENSG)
Consensus Price Target: $220.40 (29.4% implied return)
Founded in 1999 and named after a naval term for a flag-bearing ship, The Ensign Group (NASDAQ: ENSG) operates skilled nursing facilities, senior living communities, and rehabilitation services across 15 states, primarily serving high-acuity patients recovering from various medical conditions.
Why Does ENSG Stand Out?
- Impressive 19.3% annual revenue growth over the last two years indicates it’s winning market share this cycle
- Forecasted revenue growth of 16.4% for the next 12 months indicates its momentum over the last two years is sustainable
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 16.4% annually
The Ensign Group is trading at $170.28 per share, or 21.1x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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