Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like 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 two stocks poised to prove Wall Street wrong and one where the skepticism is well-placed.
One Industrials Stock to Sell:
Textron (TXT)
Consensus Price Target: $103.45 (15.1% implied return)
Listed on the NYSE in 1947, Textron (NYSE: TXT) provides products and services in the aerospace, defense, industrial, and finance sectors.
Why Are We Cautious About TXT?
- Annual sales growth of 4.9% over the last two years lagged behind its industrials peers as its large revenue base made it difficult to generate incremental demand
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 3.7%
- 4.4 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
At $89.85 per share, Textron trades at 13.9x forward P/E. To fully understand why you should be careful with TXT, check out our full research report (it’s free).
Two Industrials Stocks to Buy:
Graham Corporation (GHM)
Consensus Price Target: $112.75 (5.8% implied return)
Founded when its founder patented a unique design for a vacuum system used in the sugar refining process, Graham (NYSE: GHM) provides vacuum and heat transfer equipment for the energy, petrochemical, refining, and chemical sectors.
Why Do We Love GHM?
- Annual revenue growth of 20.3% over the past five years was outstanding, reflecting market share gains this cycle
- Operating profits increased over the last five years as the company gained some leverage on its fixed costs and became more efficient
- Additional sales over the last two years increased its profitability as the 31.5% annual growth in its earnings per share outpaced its revenue
Graham Corporation’s stock price of $106.59 implies a valuation ratio of 57.5x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
AAR (AIR)
Consensus Price Target: $131.67 (-1.3% implied return)
The first third-party MRO approved by the FAA for Safety Management System Requirements, AAR (NYSE: AIR) is a provider of aircraft maintenance services
Why Are We Bullish on AIR?
- Market share has increased this cycle as its 18.6% annual revenue growth over the last two years was exceptional
- Notable projected revenue growth of 14.3% for the next 12 months hints at market share gains
- Earnings per share grew by 19.5% annually over the last two years and trumped its peers
AAR is trading at $133.37 per share, or 25.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
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