Wall Street is overwhelmingly bullish on the stocks in this article, with price targets suggesting significant upside potential. However, it’s worth remembering that analysts rarely issue sell ratings, partly because their firms often seek other business from the same companies they cover.

Unlike the investment banks, we created StockStory to provide independent analysis that helps you determine which companies are truly worth following. Keeping that in mind, here is one stock where Wall Street’s positive outlook is supported by strong fundamentals and two where analysts may be overlooking some important risks.

Two Stocks to Sell:

Lincoln Electric (LECO)

Consensus Price Target: $294.44 (23.6% implied return)

Headquartered in Ohio, Lincoln Electric (NASDAQ: LECO) manufactures and sells welding equipment for various industries.

Why Do We Think Twice About LECO?

1. Organic revenue growth fell short of our benchmarks over the past two years and implies it may need to improve its products, pricing, or go-to-market strategy
2. Earnings growth over the last two years fell short of the peer group average as its EPS only increased by 2.4% annually
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Lincoln Electric’s stock price of $238.27 implies a valuation ratio of 22.5x forward P/E. If you’re considering LECO for your portfolio, see our FREE research report to learn more.

CVS Health (CVS)

Consensus Price Target: $96.42 (23.5% implied return)

With over 9,000 retail pharmacy locations serving as neighborhood health destinations across America, CVS Health (NYSE: CVS) operates retail pharmacies, provides pharmacy benefit management services, and offers health insurance through its Aetna subsidiary.

Why Are We Cautious About CVS?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 6% for the last two years
2. Projected sales are flat for the next 12 months, implying demand will slow from its two-year trend
3. Performance over the past five years shows its incremental sales were much less profitable, as its earnings per share fell by 2.1% annually

At $78.11 per share, CVS Health trades at 10.2x forward P/E. Read our free research report to see why you should think twice about including CVS in your portfolio.

One Stock to Buy:

Sterling (STRL)

Consensus Price Target: $494.25 (25.4% implied return)

Involved in the construction of a major highway, the Grand Parkway in Houston, TX, Sterling Infrastructure (NASDAQ: STRL) provides civil infrastructure construction.

Why Will STRL Beat the Market?

1. Annual revenue growth of 12.4% over the past two years was outstanding, reflecting market share gains this cycle
2. Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends, and its improved cash conversion implies it’s becoming a less capital-intensive business
3. Rising returns on capital show management is finding more attractive investment opportunities

Sterling is trading at $394.15 per share, or 31x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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