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.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bullish calls are justified. That said, here is one stock where Wall Street’s excitement appears well-founded and two where analysts may be overlooking some important risks.
Two Stocks to Sell:
MGP Ingredients (MGPI)
Consensus Price Target: $28.40 (74.6% implied return)
Headquartered in Atchison, Kansas, MGP Ingredients (NASDAQ: MGPI) is a leading supplier of high-quality ingredients to the food and beverage industry
Why Is MGPI Risky?
- Products have few die-hard fans as sales have declined by 12.9% annually over the last three years
- Operating profits fell over the last year as its sales dropped and it struggled to adjust its fixed costs
- Falling earnings per share over the last three years has some investors worried as stock prices ultimately follow EPS over the long term
MGP Ingredients is trading at $16.27 per share, or 8.9x forward P/E. Dive into our free research report to see why there are better opportunities than MGPI.
Hayward (HAYW)
Consensus Price Target: $17.31 (22.2% implied return)
Credited with introducing the first variable-speed pool pump, Hayward (NYSE: HAYW) makes residential and commercial pool equipment and accessories.
Why Are We Wary of HAYW?
- 2% annual revenue growth over the last five years was slower than its industrials peers
- Earnings per share have contracted by 9.6% annually over the last four years, a headwind for returns as stock prices often echo long-term EPS performance
- Free cash flow margin dropped by 8.9 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Hayward’s stock price of $14.17 implies a valuation ratio of 15.9x forward P/E. Read our free research report to see why you should think twice about including HAYW in your portfolio.
One Stock to Watch:
Booking (BKNG)
Consensus Price Target: $224.41 (33.4% implied return)
Formerly known as The Priceline Group, Booking Holdings (NASDAQ: BKNG) is the world’s largest online travel agency.
Why Does BKNG Stand Out?
- Strong consumer demand for its platform drove 15.1% annual revenue growth over the last three years, outperforming sector peers
- Performance over the past three years was turbocharged by share buybacks, which enabled its earnings per share to grow faster than its revenue
- Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
At $168.20 per share, Booking trades at 12x forward EV/EBITDA. Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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