Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
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 poised to prove Wall Street wrong and two where the skepticism is well-placed.
Two Industrials Stocks to Sell:
Covenant Logistics (CVLG)
Consensus Price Target: $35 (-0.8% implied return)
Started with 25 trucks and 50 trailers, Covenant Logistics (NASDAQ: CVLG) is a provider of expedited long haul freight services, offering a range of logistics solutions.
Why Do We Pass on CVLG?
- Muted 3.8% annual revenue growth over the last two years shows its demand lagged behind its industrials peers
- Earnings per share fell by 15.7% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
Covenant Logistics’s stock price of $35.27 implies a valuation ratio of 0.7x forward price-to-sales. Dive into our free research report to see why there are better opportunities than CVLG.
Orion (ORN)
Consensus Price Target: $17.50 (17.9% implied return)
Established in 1994, Orion (NYSE: ORN) provides construction services for marine infrastructure and industrial projects.
Why Does ORN Give Us Pause?
- Muted 4.8% annual revenue growth over the last five years shows its demand lagged behind its industrials peers
- Revenue growth over the past five years was nullified by the company’s new share issuances as its earnings per share fell by 7.6% annually
- Poor free cash flow margin of -1% for the last five years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
Orion is trading at $14.84 per share, or 31.3x forward P/E. To fully understand why you should be careful with ORN, check out our full research report (it’s free).
One Industrials Stock to Buy:
Vertiv (VRT)
Consensus Price Target: $361.65 (5.9% implied return)
Formerly part of Emerson Electric, Vertiv (NYSE: VRT) manufactures and services infrastructure technology products for data centers and communication networks.
Why Is VRT a Top Pick?
- Existing business lines can expand without risky acquisitions as its organic revenue growth averaged 23.7% over the past two years
- Free cash flow margin jumped by 22.4 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
- Returns on capital are climbing as management makes more lucrative bets
At $341.55 per share, Vertiv trades at 54.3x forward P/E. Is now the right time to buy? Find out in our full research report, it’s free.
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