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.
Whatever the consensus opinion may be, our team at StockStory cuts through the noise by conducting independent analysis to determine a company’s long-term prospects. 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:
Somnigroup (SGI)
Consensus Price Target: $102.29 (8.8% implied return)
Established through the merger of Tempur-Pedic and Sealy in 2012, Somnigroup (NYSE:SGI) is a bedding manufacturer known for its innovative memory foam mattresses and sleep products
Why Do We Think SGI Will Underperform?
- 14.3% annual revenue growth over the last five years was slower than its consumer discretionary peers
- Capital intensity will likely ramp up in the next year as its free cash flow margin is expected to contract by 1 percentage points
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Somnigroup’s stock price of $94.04 implies a valuation ratio of 29.2x forward P/E. Check out our free in-depth research report to learn more about why SGI doesn’t pass our bar.
Crane (CR)
Consensus Price Target: $215.60 (2.5% implied return)
Based in Connecticut, Crane (NYSE:CR) is a diversified manufacturer of engineered industrial products, including fluid handling, and aerospace technologies.
Why Does CR Fall Short?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.2% annually over the last five years
- Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
- Performance over the past two years was negatively impacted by new share issuances as its earnings per share grew slower than its revenue
Crane is trading at $210.28 per share, or 33.4x forward P/E. Read our free research report to see why you should think twice about including CR in your portfolio.
One Stock to Buy:
Micron (MU)
Consensus Price Target: $350.36 (-11.3% implied return)
Founded in the basement of a Boise, Idaho dental office in 1978, Micron (NYSE:MU) is a leading provider of memory chips used in thousands of devices across mobile, data centers, industrial, consumer, and automotive markets.
Why Are We Bullish on MU?
- Annual revenue growth of 61.7% over the last two years was superb and indicates its market share increased during this cycle
- Projected revenue growth of 103% for the next 12 months is above its two-year trend, pointing to accelerating demand
- Earnings growth has massively outpaced its peers over the last five years as its EPS has compounded at 29.2% annually
At $395.02 per share, Micron trades at 9.4x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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