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.
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. That said, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two facing legitimate challenges.
Two Stocks to Sell:
Flex (FLEX)
Consensus Price Target: $79.44 (-8.1% implied return)
Originally known as Flextronics until its 2016 rebranding, Flex (NASDAQ: FLEX) is a global manufacturing partner that designs, engineers, and builds products for companies across industries from medical devices to solar trackers.
Why Do We Think Twice About FLEX?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Low free cash flow margin of 2.8% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Eroding returns on capital suggest its historical profit centers are aging
Flex is trading at $86.44 per share, or 24x forward P/E. Read our free research report to see why you should think twice about including FLEX in your portfolio.
CNX Resources (CNX)
Consensus Price Target: $38.42 (1.4% implied return)
Tracing back to operations that began in 1860, CNX Resources (NYSE: CNX) drills for and produces natural gas from underground shale formations in Pennsylvania, Ohio, and West Virginia.
Why Are We Hesitant About CNX?
- Sales tumbled by 4.5% annually over the last ten years, showing market trends are working against its favor during this cycle
- Smaller revenue base of $1.85 billion means it hasn’t achieved the economies of scale that some industry juggernauts enjoy
At $37.89 per share, CNX Resources trades at 12.7x forward P/E. Check out our free in-depth research report to learn more about why CNX doesn’t pass our bar.
One Stock to Buy:
Powell (POWL)
Consensus Price Target: $172.44 (-29.3% implied return)
Originally a metal-working shop supporting local petrochemical facilities, Powell (NYSE: POWL) has grown from a small Houston manufacturer to a global provider of electrical systems.
Why Will POWL Outperform?
- Market share has increased this cycle as its 20.6% annual revenue growth over the last two years was exceptional
- Incremental sales over the last two years have been highly profitable as its earnings per share increased by 58.2% annually, topping its revenue gains
- Free cash flow margin grew by 22 percentage points over the last five years, giving the company more chips to play with
Powell’s stock price of $243.98 implies a valuation ratio of 42.5x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
High-Quality Stocks for All Market Conditions
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