1 Unpopular Stock That Deserves a Second Chance and 2 We Ignore

DG Cover Image

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.

Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. That said, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the outlook is warranted.

Two Stocks to Sell:

Dollar General (DG)

Consensus Price Target: $116.56 (4.4% 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 Is DG Not Exciting?

  1. Poor same-store sales performance over the past two years indicates it’s having trouble bringing new shoppers into its brick-and-mortar locations
  2. Gross margin of 29.9% is an output of its commoditized inventory
  3. High net-debt-to-EBITDA ratio of 5× could force the company to raise capital at unfavorable terms if market conditions deteriorate

Dollar General’s stock price of $111.65 implies a valuation ratio of 19.4x forward P/E. To fully understand why you should be careful with DG, check out our full research report (it’s free).

PennyMac Mortgage Investment Trust (PMT)

Consensus Price Target: $13.43 (8.6% implied return)

Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust (NYSE: PMT) is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.

Why Does PMT Fall Short?

  1. Muted 3.5% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
  2. Estimated net interest income decline of 145% for the next 12 months implies a challenging demand environment
  3. Tangible book value per share tumbled by 4.8% annually over the last five years, showing banking sector trends are working against its favor during this cycle

At $12.36 per share, PennyMac Mortgage Investment Trust trades at 0.8x forward P/B. Read our free research report to see why you should think twice about including PMT in your portfolio.

One Stock to Buy:

Trane Technologies (TT)

Consensus Price Target: $457.60 (7.7% implied return)

With low-pressure heating systems as its first product, Trane (NYSE: TT) designs, manufactures, and sells HVAC and refrigeration systems, the former to commercial and residential building customers and the latter to commercial truck manufacturers.

Why Is TT a Top Pick?

  1. Annual revenue growth of 11.1% over the past two years was outstanding, reflecting market share gains this cycle
  2. Share buybacks catapulted its annual earnings per share growth to 22.7%, which outperformed its revenue gains over the last two years
  3. Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures, and its returns are growing as it capitalizes on even better market opportunities

Trane Technologies is trading at $424.90 per share, or 30.7x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.

Stocks We Like Even More

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

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