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 are three stocks where the outlook is warranted and some alternatives with better fundamentals.
Alarm.com (ALRM)
Consensus price target: $63 (-2.5% implied return)
Processing over 325 billion data points annually from more than 150 million connected devices, Alarm.com (NASDAQ: ALRM) provides cloud-based platforms that enable residential and commercial property owners to remotely monitor and control their security, video, energy, and other connected devices.
Why Are We Out on ALRM?
- Customers had second thoughts about committing to its platform over the last year as its average billings growth of 8.7% underwhelmed
- Estimated sales growth of 4% for the next 12 months implies demand will slow from its two-year trend
- Static operating margin over the last year shows it couldn’t become more efficient
Alarm.com’s stock price of $64.59 implies a valuation ratio of 3.2x forward price-to-sales. Dive into our free research report to see why there are better opportunities than ALRM.
The Toro Company (TTC)
Consensus price target: $111 (5.3% implied return)
Ceasing all production to support the war effort during World War II, Toro (NYSE: TTC) offers outdoor equipment for residential, commercial, and agricultural use.
Why Are We Cautious About TTC?
- Annual revenue growth of 2.9% over the last two years was below our standards for the industrials sector
- Estimated sales growth of 3% for the next 12 months is soft and implies weaker demand
- Eroding returns on capital suggest its historical profit centers are aging
The Toro Company is trading at $105.45 per share, or 21.3x forward P/E. If you’re considering TTC for your portfolio, see our FREE research report to learn more.
Preferred Bank (PFBC)
Consensus price target: $116.50 (9.8% implied return)
Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ: PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.
Why Do We Think Twice About PFBC?
- Annual net interest income growth of 8.3% over the last five years was below our standards for the banking sector
- 45.1 basis point (100 basis points = 1 percentage point) decline in its net interest margin over the last two years reflects the firm’s willingness to accept lower profitability to defend its market position
- Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 3.9% annually
At $106.15 per share, Preferred Bank trades at 1.5x forward P/B. Check out our free in-depth research report to learn more about why PFBC doesn’t pass our bar.
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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-small-cap company Exlservice (+271% between June 2020 and June 2025). Find your next big winner with StockStory today.
