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. Keeping that in mind, here are three stocks where the outlook is warranted and some alternatives with better fundamentals.
Figs (FIGS)
Consensus Price Target: $15.21 (-2.6% implied return)
Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE: FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.
Why Should You Dump FIGS?
- Sluggish trends in its active customers suggest customers aren’t adopting its solutions as quickly as the company hoped
- Earnings per share have dipped by 3.6% annually over the past four years, which is concerning because stock prices follow EPS over the long term
- Free cash flow margin is not anticipated to grow over the next year
At $15.63 per share, Figs trades at 63.1x forward P/E. To fully understand why you should be careful with FIGS, check out our full research report (it’s free).
Allison Transmission (ALSN)
Consensus Price Target: $129.70 (15.5% implied return)
Helping build race cars at one point, Allison Transmission (NYSE: ALSN) offers transmissions to original equipment manufacturers and fleet operators.
Why Are We Wary of ALSN?
- Products and services are facing end-market challenges during this cycle, as seen in its flat sales over the last two years
- Earnings per share were flat over the last two years and fell short of the peer group average
Allison Transmission’s stock price of $112.26 implies a valuation ratio of 12.2x forward P/E. Check out our free in-depth research report to learn more about why ALSN doesn’t pass our bar.
Everest Group (EG)
Consensus Price Target: $364.53 (13.4% implied return)
Rebranded from Everest Re in 2023 to reflect its evolution beyond just reinsurance, Everest Group (NYSE: EG) underwrites property and casualty reinsurance and insurance worldwide, serving insurance companies, corporations, and other clients across six continents.
Why Are We Hesitant About EG?
- Estimated sales decline of 4.1% for the next 12 months implies a challenging demand environment
- Costs have risen faster than its revenue over the last two years, causing its pre-tax profit margin to decline by 4 percentage points
- Earnings per share fell by 17.7% annually over the last two years while its revenue grew, showing its incremental sales were much less profitable
Everest Group is trading at $321.41 per share, or 0.8x forward P/B. Dive into our free research report to see why there are better opportunities than EG.
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