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.
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 Wall Street’s pessimism is creating a buying opportunity and two facing legitimate challenges.
Two Stocks to Sell:
ScanSource (SCSC)
Consensus Price Target: $60.50 (-2% implied return)
Operating as a crucial link in the technology supply chain since 1992, ScanSource (NASDAQ: SCSC) is a hybrid distributor that connects hardware, software, and cloud services from technology suppliers to resellers and business customers.
Why Are We Wary of SCSC?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Low free cash flow margin of 2.9% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- ROIC of 8.4% reflects management’s challenges in identifying attractive investment opportunities
At $61.76 per share, ScanSource trades at 12.9x forward P/E. If you’re considering SCSC for your portfolio, see our FREE research report to learn more.
RLI (RLI)
Consensus Price Target: $59 (5.5% implied return)
Founded in 1965 and named after its original focus on "replacement lens insurance" for contact lens wearers, RLI (NYSE: RLI) is a specialty insurance company that underwrites property, casualty, and surety products through wholesale brokers, independent agents, and carrier partnerships.
Why Does RLI Worry Us?
- Expenses have increased as a percentage of revenue over the last five years as its pre-tax profit margin fell by 5.2 percentage points
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 9.1% annually
- 5% annual book value per share growth over the last two years was slower than its insurance peers
RLI is trading at $55.93 per share, or 3x forward P/B. To fully understand why you should be careful with RLI, check out our full research report (it’s free).
One Stock to Buy:
HCA Healthcare (HCA)
Consensus Price Target: $454.23 (6.4% implied return)
With roots dating back to 1968 and a network spanning 20 states, HCA Healthcare (NYSE: HCA) operates a network of 190 hospitals and 150+ outpatient facilities providing a full range of medical services across the US and England.
Why Is HCA a Top Pick?
- Enormous revenue base of $78.01 billion gives it economies of scale and advantages over new entrants due to the industry’s regulatory complexity
- Share repurchases have amplified shareholder returns as its annual earnings per share growth of 15.4% exceeded its revenue gains over the last five years
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
HCA Healthcare’s stock price of $426.75 implies a valuation ratio of 13.8x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
ONE MORE THING: Top 5 Growth Stocks. The biggest stock winners almost always had one thing in common before they ran. Revenue growing like crazy. Meta. CrowdStrike. Broadcom. Our AI flagged all three. They returned 315%, 314%, and 455%, respectively.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,552% between June 2020 and June 2025). Find your next big winner with StockStory today.
