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 are three stocks where the outlook is warranted and some alternatives with better fundamentals.
Atkore (ATKR)
Consensus Price Target: $74 (3.7% implied return)
Protecting the things that power our world, Atkore (NYSE:ATKR) designs and manufactures electrical safety products.
Why Should You Sell ATKR?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 9.6% annually over the last two years
- Free cash flow margin shrank by 9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Eroding returns on capital suggest its historical profit centers are aging
At $71.36 per share, Atkore trades at 12.8x forward P/E. If you’re considering ATKR for your portfolio, see our FREE research report to learn more.
Plexus (PLXS)
Consensus Price Target: $210.80 (-13.1% implied return)
With over 20,000 team members across 26 global facilities, Plexus (NASDAQ:PLXS) designs, manufactures, and services complex electronic products for companies in aerospace/defense, healthcare, and industrial sectors.
Why Does PLXS Worry Us?
- Sales were flat over the last two years, indicating it’s failed to expand this cycle
- Low free cash flow margin of 2.4% for the last five years gives it little breathing room, constraining its ability to self-fund growth or return capital to shareholders
- Eroding returns on capital suggest its historical profit centers are aging
Plexus’s stock price of $242.64 implies a valuation ratio of 29.9x forward P/E. Read our free research report to see why you should think twice about including PLXS in your portfolio.
Murphy Oil (MUR)
Consensus Price Target: $41.06 (5.2% implied return)
Operating in waters over a mile deep in the Gulf of Mexico and extracting hydrocarbons from tight shale rock formations in Texas, Murphy Oil (NYSE:MUR) explores for and produces crude oil, natural gas, and natural gas liquids from fields in North America and Asia.
Why Are We Wary of MUR?
- Annual revenue growth of 6.7% over the last five years was below our standards for the energy upstream and integrated energy sector
- Day-to-day expenses have swelled relative to revenue over the last five years as its EBITDA margin fell by 11.1 percentage points
Murphy Oil is trading at $39.03 per share, or 9.7x forward P/E. Check out our free in-depth research report to learn more about why MUR doesn’t pass our bar.
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