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.
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 is one stock poised to prove Wall Street wrong and two where the skepticism is well-placed.
Two Stocks to Sell:
Meritage Homes (MTH)
Consensus Price Target: $77.78 (3.8% implied return)
Originally founded in 1985 in Arizona as Monterey Homes, Meritage Homes (NYSE: MTH) is a homebuilder specializing in designing and constructing energy-efficient and single-family homes in the US.
Why Should You Dump MTH?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 5.8% annually over the last two years
- Earnings per share have contracted by 2.2% annually over the last five years, a headwind for returns as stock prices often echo long-term EPS performance
- Diminishing returns on capital suggest its earlier profit pools are drying up
Meritage Homes’s stock price of $74.94 implies a valuation ratio of 13.8x forward P/E. Dive into our free research report to see why there are better opportunities than MTH.
Assurant (AIZ)
Consensus Price Target: $280.50 (7.4% implied return)
With roots dating back to 1892 when it was founded by a Civil War veteran, Assurant (NYSE: AIZ) provides specialized insurance products and services that protect major consumer purchases like mobile devices, vehicles, homes, and appliances.
Why Are We Hesitant About AIZ?
- Outsized scale creates growth headwinds as its 5.2% annualized net premiums earned increases over the last five years underperformed other financial institutions
- Earnings per share lagged its peers over the last two years as they only grew by 13% annually
- Large asset base makes it harder to grow book value per share quickly, and its annual book value per share growth of 4.2% over the last five years was below our standards for the insurance sector
At $261.07 per share, Assurant trades at 2x forward P/B. Check out our free in-depth research report to learn more about why AIZ doesn’t pass our bar.
One Stock to Watch:
CAVA (CAVA)
Consensus Price Target: $92 (1.1% implied return)
Starting from a single Washington, D.C. location, CAVA (NYSE: CAVA) operates a fast-casual restaurant chain offering customizable Mediterranean-inspired dishes.
Why Does CAVA Catch Our Eye?
- Offensive push to build new restaurants and attack its untapped market opportunities is backed by its same-store sales growth
- Average same-store sales growth of 9.8% over the past two years indicates its restaurants are resonating with diners
- Notable projected revenue growth of 23.8% for the next 12 months hints at market share gains
CAVA is trading at $90.98 per share, or 144.2x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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