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 are three stocks facing legitimate challenges and some alternatives worth exploring instead.
ABM (ABM)
Consensus Price Target: $52.43 (9.9% implied return)
With roots dating back to 1909 as a window washing company, ABM Industries (NYSE: ABM) provides integrated facility management, infrastructure, and mobility solutions across various sectors including commercial, manufacturing, education, and aviation.
Why Are We Hesitant About ABM?
- Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
- Earnings per share have contracted by 1.4% annually over the last two years, a headwind for returns as stock prices often echo long-term EPS performance
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 1.7% for the last five years
ABM’s stock price of $47.72 implies a valuation ratio of 11.7x forward P/E. Read our free research report to see why you should think twice about including ABM in your portfolio.
Merchants Bancorp (MBIN)
Consensus Price Target: $56.50 (3.6% implied return)
With a strategic focus on low-risk, government-backed lending programs, Merchants Bancorp (NASDAQCM:MBIN) is an Indiana-based bank holding company specializing in multi-family mortgage banking, mortgage warehousing, and traditional banking services.
Why Does MBIN Fall Short?
- Annual revenue growth of 5.6% over the last two years was below our standards for the banking sector
- Operational productivity has decreased over the last five years as its efficiency ratio worsened by 16.6 percentage points
- Tier one capital ratio of 9.4% raises concerns about the firm’s ability to maintain adequate liquidity
Merchants Bancorp is trading at $54.54 per share, or 1.2x forward P/B. Dive into our free research report to see why there are better opportunities than MBIN.
Reinsurance Group of America (RGA)
Consensus Price Target: $266.89 (9% implied return)
Operating behind the scenes of the insurance industry since 1973, Reinsurance Group of America (NYSE: RGA) provides life and health reinsurance services to insurance companies, helping them manage risk and meet regulatory requirements.
Why Are We Bearish on RGA?
- Annual book value per share growth of 1.2% over the last five years lagged behind its insurance peers as its large balance sheet made it difficult to generate incremental capital growth
- Forecasted book value per share decline of 9.5% for the upcoming 12 months implies profitability will deteriorate significantly
At $244.88 per share, Reinsurance Group of America trades at 1.1x forward P/B. If you’re considering RGA for your portfolio, see our FREE research report to learn more.
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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-micro-cap company Kadant (+214% between June 2020 and June 2025). Find your next big winner with StockStory today.
