Wall Street has issued downbeat forecasts for the stocks in this article. These predictions are rare - financial institutions typically hesitate to say bad things about a company because it can jeopardize their other revenue-generating business lines like M&A advisory.
At StockStory, we look beyond the headlines with our independent analysis to determine whether these bearish calls are justified. Keeping that in mind, here is one stock where Wall Street’s pessimism is creating a buying opportunity and two where the skepticism is well-placed.
Two Stocks to Sell:
General Mills (GIS)
Consensus Price Target: $37.56 (-0.2% implied return)
Best known for its portfolio of powerhouse breakfast cereal brands, General Mills (NYSE: GIS) is a packaged foods company that has also made a mark in cereals, baking products, and snacks.
Why Should You Dump GIS?
- Declining unit sales over the past two years imply it may need to invest in product improvements to get back on track
- Sales are projected to tank by 3.1% over the next 12 months as its demand continues evaporating
- Overall productivity fell over the last year as its plummeting sales were accompanied by a decline in its operating margin
General Mills’s stock price of $37.65 implies a valuation ratio of 12x forward P/E. Check out our free in-depth research report to learn more about why GIS doesn’t pass our bar.
Avantor (AVTR)
Consensus Price Target: $9.67 (-7% implied return)
With roots dating back to 1904 and embedded in virtually every stage of scientific research and production, Avantor (NYSE: AVTR) provides mission-critical products, materials, and services to customers in biopharma, healthcare, education, and advanced technology industries.
Why Is AVTR Risky?
- 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
- Demand will likely be weak over the next 12 months as Wall Street expects flat revenue
- Earnings per share fell by 4.5% annually over the last five years while its revenue was flat, showing each sale was less profitable
At $10.40 per share, Avantor trades at 12.3x forward P/E. To fully understand why you should be careful with AVTR, check out our full research report (it’s free).
One Stock to Buy:
Gorman-Rupp (GRC)
Consensus Price Target: $74 (-12% implied return)
Powering fluid dynamics since 1934, Gorman-Rupp (NYSE: GRC) has evolved from its Ohio origins into a global manufacturer and seller of pumps and pump systems.
Why Is GRC a Good Business?
- Annual revenue growth of 14.9% over the past five years was outstanding, reflecting market share gains this cycle
- Performance over the past two years shows its incremental sales were extremely profitable, as its annual earnings per share growth of 30% outpaced its revenue gains
- Free cash flow margin jumped by 6.2 percentage points over the last five years, giving the company more resources to pursue growth initiatives, repurchase shares, or pay dividends
Gorman-Rupp is trading at $84.08 per share, or 33.8x forward P/E. Is now the time to initiate a position? See for yourself in our in-depth research report, it’s free.
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