The stocks in this article have caught Wall Street’s attention in a big way, with price targets implying returns above 20%. But investors should take these forecasts with a grain of salt because analysts typically say nice things about companies so their firms can win business in other product lines like M&A advisory.
Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. Keeping that in mind, here are three stocks where Wall Street may be overlooking some important risks and some alternatives with better fundamentals.
Carriage Services (CSV)
Consensus Price Target: $59.20 (29.1% implied return)
Established in 1991, Carriage Services (NYSE: CSV) is a provider of funeral and cemetery services in the United States.
Why Does CSV Worry Us?
- Muted 4.3% annual revenue growth over the last two years shows its demand lagged behind its consumer discretionary peers
- Anticipated sales growth of 3.9% for the next year implies demand will be shaky
- Capital intensity will likely increase as its free cash flow margin is anticipated to drop by 2.3 percentage points over the next year
Carriage Services’s stock price of $45.87 implies a valuation ratio of 13.9x forward P/E. Dive into our free research report to see why there are better opportunities than CSV.
Crown Holdings (CCK)
Consensus Price Target: $120.86 (31.1% implied return)
Formerly Crown Cork & Seal, Crown Holdings (NYSE: CCK) produces packaging products for consumer marketing companies, including food, beverage, household, and industrial products.
Why Do We Pass on CCK?
- Underwhelming constant currency revenue performance over the past two years suggests its product offering at current prices doesn’t resonate with customers
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.7%
- Gross margin of 20.4% is below its competitors, leaving less money to invest in areas like marketing and R&D
Crown Holdings is trading at $92.20 per share, or 12.4x forward P/E. Read our free research report to see why you should think twice about including CCK in your portfolio.
IAC (IAC)
Consensus Price Target: $48.69 (47.6% implied return)
Originally known as InterActiveCorp and built through Barry Diller's strategic acquisitions since the 1990s, IAC (NASDAQ: IAC) operates a portfolio of category-leading digital businesses including Dotdash Meredith, Angi, and Care.com, focusing on digital publishing, home services, and caregiving platforms.
Why Is IAC Risky?
- Sales tumbled by 20.4% annually over the last two years, showing market trends are working against its favor during this cycle
- Earnings per share have dipped by 41.3% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Negative returns on capital show management lost money while trying to expand the business
At $33 per share, IAC trades at 24.4x forward P/E. If you’re considering IAC for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
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