When Wall Street turns bearish on a stock, it’s worth paying attention. These calls stand out because analysts rarely issue grim ratings on companies for fear their firms will lose out in other business lines such as M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. 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:
Conagra (CAG)
Consensus Price Target: $14.38 (-1.8% implied return)
Founded in 1919 as Nebraska Consolidated Mills in Omaha, Nebraska, Conagra Brands today (NYSE: CAG) boasts a diverse portfolio of packaged foods brands that includes everything from whipped cream to jarred pickles to frozen meals.
Why Do We Steer Clear of CAG?
- Declining unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Sales are projected to tank by 3.9% over the next 12 months as its demand continues evaporating
- Overall productivity fell over the last year as its plummeting sales were accompanied by a decline in its operating margin
Conagra is trading at $14.64 per share, or 10.2x forward P/E. Check out our free in-depth research report to learn more about why CAG doesn’t pass our bar.
Franklin Resources (BEN)
Consensus Price Target: $35.42 (5.1% implied return)
Operating under the widely recognized Franklin Templeton brand since 1947, Franklin Resources (NYSE: BEN) is a global investment management organization that offers financial services and solutions to individuals, institutions, and wealth advisors worldwide.
Why Is BEN Risky?
- Muted 3.2% annual revenue growth over the last five years shows its demand lagged behind its financials peers
- Incremental sales over the last five years were much less profitable as its earnings per share fell by 1.6% annually while its revenue grew
At $33.70 per share, Franklin Resources trades at 10.9x forward P/E. Read our free research report to see why you should think twice about including BEN in your portfolio.
One Stock to Watch:
Vertex Pharmaceuticals (VRTX)
Consensus Price Target: $569.19 (10.5% implied return)
Founded in 1989 with a mission to create medicines that treat the underlying causes of disease rather than just symptoms, Vertex Pharmaceuticals (NASDAQ: VRTX) develops and markets transformative medicines for serious diseases, with a focus on cystic fibrosis, sickle cell disease, and pain management.
Why Should VRTX Be on Your Watchlist?
- Annual revenue growth of 13.5% over the last five years beat the sector average and underscores the unique value of its offerings
- Adjusted operating profits increased over the last two years as the company gained some leverage on its fixed costs and became more efficient
- Stellar returns on capital showcase management’s ability to surface highly profitable business ventures
Vertex Pharmaceuticals’s stock price of $515.00 implies a valuation ratio of 41.5x forward P/E. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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