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 are three stocks where the outlook is warranted and some alternatives with better fundamentals.
Tennant (TNC)
Consensus Price Target: $91.50 (1.4% implied return)
As the world’s largest manufacturer of autonomous mobile robots, Tennant (NYSE: TNC) designs, manufactures, and sells cleaning products to various sectors.
Why Is TNC Risky?
- Annual sales declines of 1.5% for the past two years show its products and services struggled to connect with the market during this cycle
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Eroding returns on capital suggest its historical profit centers are aging
Tennant’s stock price of $90.20 implies a valuation ratio of 15.8x forward P/E. To fully understand why you should be careful with TNC, check out our full research report (it’s free).
Hub Group (HUBG)
Consensus Price Target: $42.20 (-3.9% implied return)
Started with $10,000, Hub Group (NASDAQ: HUBG) is a provider of intermodal, truck brokerage, and logistics services, facilitating transportation solutions for businesses worldwide.
Why Are We Out on HUBG?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 9% annually over the last two years
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
- Waning returns on capital imply its previous profit engines are losing steam
Hub Group is trading at $43.92 per share, or 23.3x forward P/E. Read our free research report to see why you should think twice about including HUBG in your portfolio.
Lumen (LUMN)
Consensus Price Target: $8.29 (2.7% implied return)
With approximately 350,000 route miles of fiber optic cable spanning North America and the Asia Pacific, Lumen Technologies (NYSE: LUMN) operates a vast fiber optic network that provides communications, cloud connectivity, security, and IT solutions to businesses and consumers.
Why Do We Avoid LUMN?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.4% annually over the last two years
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 17.8% annually
- Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 14.7 percentage points
At $8.07 per share, Lumen trades at 1x forward price-to-sales. Dive into our free research report to see why there are better opportunities than LUMN.
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