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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. That said, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.
Dollar General (DG)
Consensus Price Target: $114.77 (0.1% implied return)
Appealing to the budget-conscious consumer, Dollar General (NYSE: DG) is a discount retailer that sells a wide range of household essentials, groceries, apparel/beauty products, and seasonal merchandise.
Why Do We Think Twice About DG?
- Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
- Commoditized inventory, bad unit economics, and high competition are reflected in its low gross margin of 29.9%
- 5× net-debt-to-EBITDA ratio makes lenders less willing to extend additional capital, potentially necessitating dilutive equity offerings
At $114.68 per share, Dollar General trades at 19.7x forward P/E. Dive into our free research report to see why there are better opportunities than DG.
Vishay Precision (VPG)
Consensus Price Target: $30.25 (6.9% implied return)
Emerging from Vishay Intertechnology in 2010, Vishay Precision (NYSE: VPG) operates as a global provider of precision measurement and sensing technologies.
Why Do We Pass on VPG?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 9.6% annually over the last two years
- Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 6.3 percentage points
- Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 16.2% annually
Vishay Precision’s stock price of $28.31 implies a valuation ratio of 23.4x forward P/E. Check out our free in-depth research report to learn more about why VPG doesn’t pass our bar.
Corebridge Financial (CRBG)
Consensus Price Target: $38 (5.6% implied return)
Spun off from insurance giant AIG in 2022 to focus on the growing retirement market, Corebridge Financial (NYSE: CRBG) provides retirement solutions, annuities, life insurance, and institutional risk management products in the United States.
Why Should You Sell CRBG?
- Insurance products are facing significant market challenges during this cycle as net premiums earned has declined by 19.2% annually over the last two years
- Overall productivity fell over the last two years as its plummeting sales were accompanied by a decline in its pre-tax profit margin
- Annual book value per share declines of 21.7% for the past four years show its capital management struggled during this cycle
Corebridge Financial is trading at $36 per share, or 1.5x forward P/B. Read our free research report to see why you should think twice about including CRBG in your portfolio.
Stocks We Like More
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