Wall Street has set ambitious price targets for the stocks in this article. While this suggests attractive upside potential, it’s important to remain skeptical because analysts face institutional pressures that can sometimes lead to overly optimistic forecasts.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. That said, here is one stock likely to meet or exceed Wall Street’s lofty expectations and two where consensus estimates seem disconnected from reality.
Two Stocks to Sell:
Floor And Decor (FND)
Consensus Price Target: $58.82 (32% implied return)
Operating large, warehouse-style stores, Floor & Decor (NYSE: FND) is a specialty retailer that specializes in hard flooring surfaces for the home such as tiles, hardwood, stone, and laminates.
Why Are We Bearish on FND?
- Lackluster 2.3% annual revenue growth over the last three years indicates the company is losing ground to competitors
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Underwhelming 7.8% return on capital reflects management’s difficulties in finding profitable growth opportunities, and its falling returns suggest its earlier profit pools are drying up
Floor And Decor’s stock price of $44.56 implies a valuation ratio of 21.6x forward P/E. Dive into our free research report to see why there are better opportunities than FND.
MillerKnoll (MLKN)
Consensus Price Target: $31.50 (48.7% implied return)
Created through the 2021 merger of industry icons Herman Miller and Knoll, MillerKnoll (NASDAQ: MLKN) designs, manufactures, and distributes interior furnishings for offices, healthcare facilities, educational settings, and homes worldwide.
Why Do We Steer Clear of MLKN?
- Muted 3.3% annual revenue growth over the last two years shows its demand lagged behind its business services peers
- Issuance of new shares over the last five years caused its earnings per share to fall by 5.6% annually while its revenue grew
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2.7% for the last five years
At $21.18 per share, MillerKnoll trades at 10.8x forward P/E. If you’re considering MLKN for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Paymentus (PAY)
Consensus Price Target: $40.14 (24.6% implied return)
Founded in 2004 to simplify the complex world of bill payments, Paymentus (NYSE: PAY) provides a cloud-based platform that helps utilities, municipalities, and service providers automate billing and payment processes.
Why Are We Bullish on PAY?
- Annual revenue growth of 39.5% over the last two years was superb and indicates its market share increased during this cycle
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 47.8% annually, topping its revenue gains
Paymentus is trading at $32.22 per share, or 32.5x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.
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