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.
Luckily for you, we at StockStory have no conflicts of interest - our sole job is to help you find genuinely promising companies. That said, here is one stock where Wall Street’s positive outlook is supported by strong fundamentals and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell:
Hyster-Yale Materials Handling (HY)
Consensus Price Target: $47 (28% implied return)
Playing a significant role in the development of the hydraulic lift truck, Hyster-Yale (NYSE: HY) designs, manufactures, and sells materials handling equipment to various sectors.
Why Do We Avoid HY?
- Sales tumbled by 4.3% annually over the last two years, showing market trends are working against its favor during this cycle
- Low free cash flow margin of -0.1% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
Hyster-Yale Materials Handling is trading at $36.73 per share, or 19.1x forward EV-to-EBITDA. To fully understand why you should be careful with HY, check out our full research report (it’s free).
Hayward (HAYW)
Consensus Price Target: $17.50 (19.5% implied return)
Credited with introducing the first variable-speed pool pump, Hayward (NYSE: HAYW) makes residential and commercial pool equipment and accessories.
Why Does HAYW Worry Us?
- Annual revenue growth of 5.1% over the last five years was below our standards for the industrials sector
- Estimated sales growth of 4.2% for the next 12 months implies demand will slow from its two-year trend
- Earnings per share have contracted by 20.8% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
Hayward’s stock price of $14.65 implies a valuation ratio of 17.6x forward P/E. Read our free research report to see why you should think twice about including HAYW in your portfolio.
One Stock to Watch:
Braze (BRZE)
Consensus Price Target: $34.95 (53.1% implied return)
With its technology powering interactions with 6.2 billion monthly active users across the digital landscape, Braze (NASDAQ: BRZE) provides a platform that helps brands build and maintain direct relationships with their customers through personalized, cross-channel messaging and engagement.
Why Does BRZE Stand Out?
- Billings growth has averaged 28% over the last year, indicating a healthy pipeline of new contracts that should drive future revenue increases
- Forecasted revenue growth of 20.3% for the next 12 months indicates its momentum over the last two years is sustainable
At $22.82 per share, Braze trades at 2.5x forward price-to-sales. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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