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.
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 are three stocks where the skepticism is well-placed and some better opportunities to consider.
QuidelOrtho (QDEL)
Consensus price target: $14.67 (12.7% implied return)
Born from the 2022 merger of Quidel and Ortho Clinical Diagnostics, QuidelOrtho (NASDAQ: QDEL) develops and manufactures diagnostic testing solutions for healthcare providers, from rapid point-of-care tests to complex laboratory instruments and systems.
Why Do We Steer Clear of QDEL?
- Weak constant currency growth over the past two years indicates challenges in maintaining its market share
- Eroding returns on capital from an already low base indicate that management’s recent investments are destroying value
- High net-debt-to-EBITDA ratio of 5× could force the company to raise capital on unfavorable terms if market conditions deteriorate
QuidelOrtho’s stock price of $13.02 implies a valuation ratio of 6.9x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including QDEL in your portfolio.
Northwest Bancshares (NWBI)
Consensus price target: $16.43 (5.8% implied return)
Founded in 1896 and operating across Pennsylvania, New York, Ohio, and Indiana, Northwest Bancshares (NASDAQ: NWBI) is a bank holding company that operates Northwest Bank, providing personal and business banking, investment management, and trust services.
Why Does NWBI Fall Short?
- Annual net interest income growth of 7.9% over the last five years was below our standards for the banking sector
- Annual earnings per share growth of 4.6% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Tangible book value per share was flat over the last two years, indicating it’s failed to build equity value this cycle
At $15.53 per share, Northwest Bancshares trades at 1.2x forward P/B. If you’re considering NWBI for your portfolio, see our FREE research report to learn more.
PulteGroup (PHM)
Consensus price target: $132.41 (4.4% implied return)
Having delivered over 850,000 homes since its founding in 1950, PulteGroup (NYSE: PHM) is one of America's largest homebuilders, constructing single-family homes, townhouses, and condominiums for first-time, move-up, and active adult buyers across 46 markets in 25 states.
Why Do We Pass on PHM?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 4% annually over the last two years
- Earnings per share have dipped by 15.5% annually over the past two years, which is concerning because stock prices follow EPS over the long term
- Eroding returns on capital suggest its historical profit centers are aging
PulteGroup is trading at $126.89 per share, or 14.2x forward P/E. Check out our free in-depth research report to learn more about why PHM doesn’t pass our bar.
Stocks we like more
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