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. That said, here is one stock where Wall Street’s positive outlook is supported by strong fundamentals and two where its enthusiasm might be excessive.
Two Stocks to Sell:
Flowers Foods (FLO)
Consensus Price Target: $10 (35.9% implied return)
With Wonder Bread as its premier brand, Flowers Foods (NYSE: FLO) is a packaged foods company that focuses on bakery products such as breads, buns, and cakes.
Why Do We Pass on FLO?
- Falling unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
- Forecasted revenue decline of 1.3% for the upcoming 12 months implies demand will fall off a cliff
- Earnings per share fell by 21% annually over the last three years while its revenue grew, showing its incremental sales were much less profitable
Flowers Foods is trading at $7.36 per share, or 9.3x forward P/E. Check out our free in-depth research report to learn more about why FLO doesn’t pass our bar.
Franklin BSP Realty Trust (FBRT)
Consensus Price Target: $13 (42.3% implied return)
Operating as a specialized real estate investment trust (REIT) with roots dating back to 2012, Franklin BSP Realty Trust (NYSE: FBRT) originates and manages a diversified portfolio of commercial real estate debt investments secured by properties in the United States and abroad.
Why Is FBRT Risky?
- Flat net interest income over the last five years suggest it must find different ways to grow during this cycle
- Net interest income is projected to tank by 3.7% over the next 12 months as demand evaporates further
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
At $9.14 per share, Franklin BSP Realty Trust trades at 0.6x forward P/B. If you’re considering FBRT for your portfolio, see our FREE research report to learn more.
One Stock to Buy:
Wingstop (WING)
Consensus Price Target: $235.97 (97.4% implied return)
The passion project of two chicken wing aficionados in Texas, Wingstop (NASDAQ: WING) is a popular fast-food chain known for its flavorful and crispy chicken wings offered in a variety of sauces and seasonings.
Why Will WING Beat the Market?
- Customers are lining up to eat at its restaurants as the company’s same-store sales growth averaged 4.8% over the past two years
- Excellent operating margin of 25.9% highlights the efficiency of its business model, and its profits increased over the last year as it scaled
- WING is a free cash flow machine with the flexibility to invest in growth initiatives or return capital to shareholders, and its growing cash flow gives it even more resources to deploy
Wingstop’s stock price of $119.54 implies a valuation ratio of 25.4x forward P/E. Is now the time to initiate a position? See for yourself in our comprehensive research report, it’s free.
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