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.
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. Keeping that in mind, here is one stock where you should be greedy instead of fearful and two where the outlook is warranted.
Two Stocks to Sell:
agilon health (AGL)
Consensus Price Target: $52.42 (-34.5% implied return)
Transforming how doctors care for seniors by shifting financial incentives from volume to outcomes, agilon health (NYSE: AGL) provides a platform that helps primary care physicians transition to value-based care models for Medicare patients through long-term partnerships and global capitation arrangements.
Why Are We Cautious About AGL?
- Weak customer trends over the past two years suggest it may need to improve its products, pricing, or go-to-market strategy
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Cash burn makes us question whether it can achieve sustainable long-term growth
agilon health’s stock price of $80.01 implies a valuation ratio of 103.4x forward EV-to-EBITDA. Read our free research report to see why you should think twice about including AGL in your portfolio.
Markel Group (MKL)
Consensus Price Target: $2,005 (8% implied return)
Often referred to as a "mini Berkshire Hathaway" for its three-engine business model of insurance, investments, and wholly-owned businesses, Markel Group (NYSE: MKL) is a specialty insurance company that underwrites complex risks, manages investment portfolios, and owns a diverse collection of operating businesses.
Why Does MKL Give Us Pause?
- Outsized scale creates growth headwinds as its 1.3% annualized net premiums earned increases over the last two years underperformed other financial institutions
- Projected sales decline of 3.4% for the next 12 months points to a tough demand environment ahead
- Efficiency has decreased over the last five years as its pre-tax profit margin fell by 22.1 percentage points
Markel Group is trading at $1,857 per share, or 1.2x forward P/B. Check out our free in-depth research report to learn more about why MKL doesn’t pass our bar.
One Stock to Watch:
Cactus (WHD)
Consensus Price Target: $63.22 (2.3% implied return)
Named for the spiky wellhead equipment that reminded founders of desert cacti, Cactus (NYSE: WHD) manufactures wellheads, valves, and spoolable pipes used in drilling and producing oil and gas wells.
Why Does WHD Stand Out?
- Annual revenue growth of 23.2% over the last nine years was superb and indicates its market share increased during this cycle
- EBITDA margin expanded by 2.3 percentage points over the last five years as it scaled and became more efficient
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $61.79 per share, Cactus trades at 2.6x forward price-to-sales. Is now the time to initiate a position? Find out in our full research report, it’s free.
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